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2010-11 Santa Cruz Grand Jury final report

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					Santa Cruz County
   Grand Jury




     2010-2011
    Final Report
Cover photographs from en.wikipedia.org/wiki/Watsonville,_California
                                        County of Santa Cruz
                                                          Grand Jury
                                                    701 Ocean Street, Room 318-I
                                                       Santa Cruz, CA 95060
                                                           (831) 454-2099

                                                                                             June 29, 2011
To the Citizens of Santa Cruz County:

The Grand Jury encourages all citizens to become involved with local government. Without the people’s
voice and scrutiny, government lacks the accountability that makes it responsive to the needs of the
citizens. This is the great gift we have been granted in our country, state, and local governments –
“...government of the people, by the people, and for the people...” If we don’t get involved, we deserve
what we get.

The 2010-2011 Santa Cruz County Grand Jury Report addresses concerns of government process and
transparency. During the past year, the Santa Cruz County Grand Jury has spent thousands of hours
investigating:
    ● The process and transparency within the Watsonville City Government
    ● Integrative planning between the Regional Transportation Commission and local planning
        departments
    ● Record keeping, transparency, and processes for cancellation of county property tax penalties
    ● Vendor selection process for medical, dental, and vision consulting services by Pajaro Valley
        Unified School District
    ● Optimal use of County jail facilities

The Grand Jury report requires a response to the findings and recommendations from the indicated
officials and departments. Based on a review of the responses, the next Grand Jury may elect to reopen or
renew the investigations.

I have been privileged to work with a group of community-minded, intelligent, creative, and energetic
people who dedicated their personal time to challenge our local government to be responsive to the needs
and expectations of its citizens. This report is the culmination of their collaboration, which has included
interviews, site visits, attendance at public meetings, data research and analysis.

The Grand Jury thanks all the people throughout the County who cooperated with our investigations and
provided valuable information for this report. The Grand Jury also wishes to thank our statutory advisors:
Presiding Judge Paul Burdick, County Counsel Rahn Garcia, and District Attorney Bob Lee. Their
guidance and timely responses to our inquiries were instrumental to our investigations.

On behalf of all the members of the 2010-2011 Santa Cruz County Grand Jury, I present the Final Report
for 2010-2011.




Gayle M. Larson
Foreperson
                          Table of Contents

Introduction                                                              iii

Grand Jurors                                                               v

Instructions to Respondents                                              vii

Penal Code § 933.05                                                      viii



                                    Reports
City of Watsonville:
Fastest Growing City Looking for Leadership and a Fire Truck               9
            - Fire Truck Investigation                              13
            - Environmental Health Investigation                    17
            - Airport Investigation                                 19
            - Redevelopment Agency Investigation                    23
            - Manabe-Ow Investigation                               24

Back to the Future:
Regional Gridlock and Local Planning Paralysis                            33

Delinquent Property Tax Penalty Cancellations:
“A Day Late and a Dollar Short”                                           39

Pajaro Valley Unified School District Insurance Vendor Selection:
Are There Options?                                                       49

Santa Cruz County Correctional Facilities:
Are They Effectively Utilized and What Are the Options?                   63




                                          i
ii
                                      Introduction
Each year, nineteen jurors are selected through a combination of random processes and personal
interviews to serve for one year, from July 1 through June 30, on the Santa Cruz County Grand
Jury. These jurors are your neighbors, serving as independent watchdogs over local government
on your behalf.

The grand jury concept dates back to the Norman conquest of England in the eleventh century. In
the United States, the Massachusetts Bay Colony impaneled the first grand jury in about 1635 to
consider instances of murder, robbery, and wife beating. Both the U. S. Constitution’s Fifth
Amendment and the California Constitution call for grand juries, and they were established
throughout California during the early years of statehood. Now each of the 58 counties in this
state impanels a grand jury.

Although most people think a grand jury only considers whether a crime has been committed and
whether a certain person should be charged with that crime and required to stand trial, the grand
jury in Santa Cruz County is an investigative body with three primary functions:
    ● Examination of all aspects of county government, city government, and special districts
        to ensure that those who govern are honest and efficient and that local government funds
        are being spent appropriately
    ● Investigation of complaints filed by citizens
    ● Inspection or investigation of the management and condition of all public prisons within
        the county

The grand jury submits a final report of its findings and recommendations before the end of its
term to the Presiding Judge of the Superior Court. Government officials and agencies to which
the recommendations are directed are required to respond to the details in the report within 60 or
90 days. The report and the responses are available to the public at the grand jury website and in
the local libraries. However, while the reports are public, all investigations and interviews are
kept secret, and the jury’s records may not be inspected or subpoenaed.

Citizens may submit complaints directly to the grand jury requesting it to investigate what they
perceive as mistreatment by officials or suspicions of governmental misconduct or inefficiencies.
The jury is not a consumer complaint agency but uses complaints to identify policies and
procedures that might need improvement. While the grand jury cannot investigate every
complaint, each one is considered carefully and treated confidentially. The ultimate goal of the
grand jury is to improve government in the county and to make public officials responsive to the
people.

Additional information about the grand jury, and complaint forms, are available at the address
and website below:
                                 Santa Cruz County Grand Jury
                                 701 Ocean Street, Room 318-I
                                     Santa Cruz, CA 95060
                        Telephone: 831-454-2099       Fax: 831-454-3387
 e-mail: grandjury@co.santa-cruz.ca.us        website: http://www.co.santa-cruz.ca.us/grandjury

                                                iii
iv
                        2010-2011 Grand Jurors

Front row, left to right:    Janice Hewitt
                             Kris Desmond
                             Marc Los Huertos
                             Doug Horton
Second row, left to right:   Alex Clancy
                             Jay Leite
                             Carl Galewski
                             Greg Fyvie
                             Jim Kerr
Back row, left to right:     Rich Simms
                             Cheri Hrapoff
                             Steve Johnson
                             Patricia Goslin
                             Erik Zinn
Not pictured:                Bob Blanchfield
                             William Gutzwiller
                             Gayle Larson
                             Dolores McCabe
                             Amber McMeans


                                       v
Photograph of jurors courtesy of Marc Los Huertos




                       vi
                        Instructions for Respondents
California law PC § 933.05 requires that those responding to the Grand Jury report must provide a
response for each individual finding and recommendation within a report, not a generalized response to
the entire report. Explanations for disagreements and timeframes for future implementation or analysis
must be provided. Please follow the format below when preparing your response.

Response Format
    1. Find the Responses Required table that appears near the end of the report. Look for the row with
       the name of the entity you represent and then respond to the Findings and/or Recommendations
       listed in that row using the custom form provided to you.
    2. For Findings, indicate one of the following responses and provide the required additional
       information:
            • AGREE with the Finding,
            • PARTIALLY AGREE or PARTIALLY DISAGREE with the Finding and specify the
                portion of the Finding that is disputed and include an explanation of the reasons
                therefore, or
            • DISAGREE with the Finding and provide an explanation of the reasons therefore.
    3. For Recommendations select one of the following actions and provide the required additional
       information:
            • HAS BEEN IMPLEMENTED, with a summary regarding the implemented action,
            • HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IMPLEMENTED IN THE
                FUTURE, with a timeframe or expected date for implementation,
            • REQUIRES FURTHER ANALYSIS, with an explanation and the scope and parameters
                of an analysis or study, and a timeframe for that analysis or study; this timeframe shall
                not exceed six months from the date of publication of the grand jury report,
            • WILL NOT BE IMPLEMENTED because it is not warranted or is not reasonable, with
                an explanation therefore.

    If you have questions about the response report, please contact the Grand Jury by calling 831-454-
    2099 or by sending an e-mail to grandjury@co.santa-cruz.ca.us.

How and Where to Respond
    1. Please use the electronic Adobe PDF Response Form provided to you for your responses. There is
       one form page provided for each Finding and Recommendation. Be sure to save any changes you
       make to the form.
    2. Print and send a hard copy of the finished Adobe PDF Response Form to:
           The Honorable Judge Timothy Volkmann
           Santa Cruz Superior Court
           701 Ocean Street
           Santa Cruz, CA 95060
    3. Send the electronic version of the Adobe PDF Response Form via e-mail to the Grand Jury at
       grandjury@co.santa-cruz.ca.us.

Due Dates
Elected officials or administrators are required to respond within 60 days of the Grand Jury report’s
publication. Responses by the governing body of any public entity are required within 90 days.




                                                    vii
                              Penal Code § 933.05
1. For purposes of subdivision (b) of § 933, as to each Grand Jury finding, the responding person or
    entity shall indicate one of the following:
        a. the respondent agrees with the finding,
        b. the respondent disagrees wholly or partially with the finding, in which case the response
            shall specify the portion of the finding that is disputed and shall include an explanation of
            the reasons therefore.

2. For purposes of subdivision (b) of § 933, as to each Grand Jury recommendation, the responding
    person shall report one of the following actions:
        a. the recommendation has been implemented, with a summary regarding the implemented
            action,
        b. the recommendation has not yet been implemented but will be implemented in the future,
           with a timeframe for implementation,
        c. the recommendation requires further analysis, with an explanation and the scope and
           parameters of an analysis or study, and a timeframe for the matter to be prepared for
           discussion by the officer or director of the agency or department being investigated or
           reviewed, including the governing body of the public agency when applicable. This
           timeframe shall not exceed six months from the date of publication of the Grand Jury
           report, or
        d. the recommendation will not be implemented because it is not warranted or is not
           reasonable, with an explanation therefore.

3. However, if a finding or recommendation of the Grand Jury addresses budgetary or personnel
    matters of a County department headed by an elected officer, both the department head and the
    Board of Supervisors shall respond if requested by the Grand Jury, but the response of the Board
    of Supervisors shall address only those budgetary or personnel matters over which it has some
    decision-making authority. The response of the elected department head shall address all aspects
    of the findings or recommendations affecting his or her department.

4. A Grand Jury may request a subject person or entity to come before the Grand Jury for the
    purpose of reading and discussing the findings of the Grand Jury report that relates to that person
    or entity in order to verify the accuracy of the findings prior to their release.

5. During an investigation, the Grand Jury shall meet with the subject of that investigation regarding
    that investigation unless the court, either on its own determination or upon request of the
    foreperson of the Grand Jury, determines that such a meeting would be detrimental.

6. A Grand Jury shall provide to the affected agency a copy of the portion of the Grand Jury report
    relating to that person or entity two working days prior to its public release and after the approval
    of the presiding judge. No officer, agency, department or governing body of a public agency shall
    disclose any contents of the report prior to the public release of the final report.




                                                  viii
                                                                                                  ∫9



                                City of Watsonville:
            Fastest Growing City Looking for Leadership and a Fire Truck


Summary
The effectiveness of all local governments (cities and counties) depends on internal rules,
charters, ordinances, and applicable state and federal laws, all of which lay out policies and
procedures that guide government officials for the collective good of the citizens. Perhaps the
most important of these legal requirements are those that promote transparency and public
accountability.

Santa Cruz County has four cities: Scotts Valley, Santa Cruz, Capitola, and Watsonville. Of
these four municipalities, Watsonville has experienced the largest population growth. As of 2010
Watsonville had reached a population of 51,199 which represents a growth rate of nearly 6 times
that of the rest of the county.[1]

The Santa Cruz County Grand Jury has found that the City of Watsonville has not been
conducting its business in a professional way; one that is transparent in all its dealings, and one
that gives all relevant information needed by elected officials to be able to make informed
decisions. After looking at concerns brought to its attention, the Grand Jury decided to focus on
five issues that are illustrative of a laxity of process and controls in the Watsonville City
Government:

   ● Issuance of a check for $225,000, in April 2008, for the purchase of a fire truck, which
     has yet to be delivered to the City of Watsonville.
   ● Issues concerning the granting of permits at known hazardous materials sites.
   ● Continuing costs of litigation over future land use planning issues concerning the airport.
   ● Inability to determine how the City of Watsonville has spent its Redevelopment dollars
     with respect to eliminating blight and creating jobs.
   ● Approval of the Manabe-Ow project based on misleading information.

The debate over these issues is ongoing. In some cases the debate has lasted more than a decade.
The resolution of these controversial and divisive issues is vital to the future of the City. The
Grand Jury believes the Watsonville City Manager should implement processes to ensure
transparency, completeness, and accuracy of the information provided to the City Council, City
Commissions and the public.

Definitions
   ● Aerial Ladder Truck: (also Truck, Ladder Truck, Tiller Ladder Truck, Tractor Drawn
     Aerial, TDA). A specialized firefighting vehicle with a large telescoping ladder, used to
     provide access to upper stories of buildings.
   ● Airport: Watsonville Municipal Airport.
   ● Arsenic: A naturally occurring metallic element, which is also a byproduct of the coal
     gasification process. Arsenic is toxic if ingested or inhaled in sufficient quantity.
10 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   ● Best Practices: Commercial or professional procedures that are accepted or prescribed as
     being correct or most effective.
   ● California Environmental Protection Agency: (CEPA). A State cabinet-level agency
     within the government of California responsible for environmental research, regulating
     and administering the state's environmental protection programs, and fulfilling hazardous
     waste cleanup.
   ● Carcinogen: Any substance or agent that produces cancer or increases the risk of
     developing cancer in humans or animals.
   ● CDBG: Community Development Block Grant. Entitlement grant from the U.S.
     Department of Housing and Urban Development to fund City projects, particularly those
     without other available funding.
   ● City Council: Refers to Watsonville City Council. The seven elected City Council
     Members of the City of Watsonville, acting as the elected governing body, which meets
     twice monthly.
   ● City Government: Refers to Watsonville City Government. The Watsonville City
     Council and Watsonville City Staff, operating under the city charter, which specifies the
     City Manager form of government.
   ● City Manager: Refers to the Watsonville City Manager. The City Manager, appointed
     by the City Council, supervises all heads of City departments, all activities and operations
     of the City, and makes recommendations to the City Council.
   ● City Staff: Refers to Watsonville City Staff. All employees of the City of Watsonville.
   ● Coal Gasification: Manufactured gas historically produced in urbanized areas. The gas
     was made by roasting organic matter to drive off volatiles in the form of useful gases.
     Gas production also resulted in harmful waste byproducts such as toxic tar residue. Most
     of these tar residuals are highly resistant to natural degradation in the environment and as
     such may exist centuries to thousands of years.
   ● Community Development Department: The City of Watsonville department
     responsible for the review of development and building activity to ensure compliance
     with zoning and building codes, General Plan policies, the California Environmental
     Quality Act (CEQA) and community values.
   ● Covenant: A legal agreement between parties to engage in or refrain from a specified
     action.
   ● CUPA: Certified Unified Program Agency. An agency certified by the California
     Department of Toxic Substances Control to conduct the Unified Program, which consists
     of hazardous waste generator and onsite treatment programs; aboveground and
     underground storage tank programs; Hazardous Materials Management, and Business
     Plans and Inventory Statements; and the Risk Management and Prevention Program.
   ● DOT: California Department of Transportation.
   ● DTSC: The California Department of Toxic Substances Control. DTSC programs
     include dealing with the aftermath of improper hazardous waste management by
     overseeing site cleanups; preventing the releases of hazardous waste, by ensuring that
     those who generate, handle, transport, store and dispose of wastes do so properly; and
     taking enforcement actions against those who fail to manage hazardous wastes
     appropriately.
                                                                         City of Watsonville ∫ 11



● EHS: Santa Cruz County Environmental Health Services.
● EnviroStor: The California Department of Toxic Substances Control’s (DTSC’s) online
  database search and Geographic Information System (GIS) tool for identifying sites
  where extensive investigation and/or cleanup actions are planned or have been completed
  at permitted facilities and cleanup sites. It also identifies facilities that are authorized to
  treat, store, dispose of or transfer hazardous waste. Users can conduct searches using
  various criteria, including facility/site name, address, city, and county. Results can be
  displayed in a list format or on an interactive map. The EnviroStor database can also be
  downloaded.
● Fortis: A comprehensive software suite for document management used by some
  departments of the County of Santa Cruz, including Environmental Health Services.
● General Plan: A document containing a statement of development policies, including a
  diagram and text setting forth the objectives of the plan. The general plan must include
  certain state mandated elements related to land use, circulation, housing, conservation,
  open-space, noise and safety.
● Geotracker: The California State Water Resources Control Board’s online database
  system, developed primarily to give users the ability to assess potential threats to drinking
  water sources. This system consists of a relational database, online compliance reporting
  features, a GIS interface and other features, used by the State Board, regional boards,
  local agencies, regulated industry and the public, to track and archive compliance data
  from authorized or unauthorized discharges of waste to land, or unauthorized releases of
  hazardous substances from underground storage tanks.
● Hexavalent Chromium: A toxic, carcinogenic form of the element chromium. It is also
  a byproduct of the coal gasification process.
● Institute for Local Government: The research and education affiliate of the California
  State Association of Counties and the League of California Cities. Their mission is to
  promote good government at the local level with practical, impartial, and easy-to-use
  resources for California communities.
● MOSP: Manabe-Ow Specific Plan. A policy statement and implementation tool that will
  be used to guide development of the Manabe-Ow Business Park. The MOSP contains
  concrete standards and development criteria that supplement those of the general plan.
● NFPA: National Fire Protection Association. An authoritative source on public safety.
  NFPA develops, publishes, and disseminates more than 300 consensus codes and
  standards intended to minimize the possibility and effects of fire and other risks.
● Petroleum Hydrocarbons: Petroleum hydrocarbons are the primary constituents in oil,
  gasoline, diesel, and a variety of solvents and penetrating oils. As such, petroleum
  hydrocarbons are a primary focus of many contaminated site assessments.
● Plaintiff: The party or persons who initiate a lawsuit.
● Polynuclear Aromatic Hydrocarbons: Toxic petroleum substances that accumulate in
  the food chain. They are often found at former manufactured gas plants that use coal.
● RDA: Refers to Watsonville Redevelopment Agency.
● Senior Staff: Refers to Watsonville City Senior Staff. Watsonville City employees who
  report directly to the City Manager.
12 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   ● Staff Report: A report presented to the City Council or City Commissions by a member
     of the City Staff which presents the details concerning an item on the City Council or
     Commissions’ agendas. This is typically in the form of a memorandum to the City
     Manager with attachments as appropriate. The City Manager’s approval typically appears
     on the copy of the memorandum given to the City Council Members.
   ● TAC: Refers to Manabe-Ow Technical Advisory Committee.
   ● UL: Underwriters Laboratory. A non-profit safety testing and certification organization.
   ● Watsonville 2005 General Plan: The general plan adopted by the City in May 1994.
   ● WatsonvilleVISTA 2030: The general plan adopted by the City in June 2006, sections of
     which have been invalidated by action of the California Superior Court.
   ● Writ of Mandate: A court order to a government agency, including another court, to
     follow the law by correcting its prior actions or ceasing illegal acts.
   ● WRDA, or RDA: Watsonville Redevelopment Agency, whose goal is the elimination of
     structural and economic blight in the central commercial and industrial area through the
     Redevelopment Agency powers and funding.

Background
This investigation stems from a July 2010 op-ed article in the Santa Cruz Sentinel, titled
“Watsonville ‘sweetheart’ loan puzzling.”[2] The article highlighted a questionable RDA loan,
permits at a hazardous materials site, and preferential treatment of some business owners over
others in the City of Watsonville. A cursory records check by the Grand Jury revealed that the
Watsonville City Planning Commission and the Watsonville City Council, through systemic
failure, permitted the use of an outdoor patio at a restaurant, over an identified and unmitigated
hazardous materials site.[27][30][31][36]

Scope
The Grand Jury investigated the practices, policies and procedures of the City of Watsonville
with a focus upon the accuracy and completeness of Staff reports. We initially investigated
decisions by the Planning Commission, but soon expanded to multiple areas of City
Government, focusing on issues that were brought before the City Council.

The factual basis for the investigation was established through research of public records and
multiple interviews of elected officials, City Staff, appointed officials, concerned citizens,
business leaders, and journalists. The investigation was conducted to determine the transparency,
completeness, and accuracy of information provided by City Staff to the City Council, City
Commissions, and the public.

The investigation revealed many cases of inaccurate or incomplete information in staff reports.
Multiple explanations were given for these lapses. They will be described in each of the
following investigative sections.
                                                                           City of Watsonville ∫ 13



                                Fire Truck Investigation
In April 2008, The City of Watsonville issued a check for $225,000 for the purchase of a Pierce
Lance aerial ladder truck from a broker. The funding for the truck came from a Federal
Community Development Block Grant.[3] The City was already aware of a KME truck owned by
the City of Pasadena, which was a better fit for Watsonville but unfortunately was not for sale at
that time. A complicated series of events has occurred over the past three years and now the City
is pursuing the KME, which is now available, instead of the Pierce; however, as of the date of
submission of this report, the City has paid in full, and has no truck.

This fire truck has been the subject of numerous newspaper articles and inquiries at City Council
meetings. It appears that the vehicle will be a good value and is well suited to the needs of the
City when it is delivered and placed into service. The aerial ladder truck would certainly have
been beneficial in fighting the recent major fire at the Apple Growers Warehouse. The Grand
Jury does not question the decision made by the Fire Chief or Staff in selecting the vehicle.
However, the Grand Jury’s investigation surrounding the purchase demonstrates a lack of
transparency, completeness, and accuracy in the information provided to the City Council and
the public. These procedural irregularities undermine public confidence in the City’s financial
practices.

The Grand Jury reviewed documents provided by the Fire Chief, the City Clerk, City Staff, and
the City of Pasadena. They are frequently confusing and contradictory. Specific concerns
include:

   1. Two different trucks are referenced throughout the documents.
        1992 Pierce Lance 105’ Tractor Drawn Aerial
        1999 KME Tractor 100’ Aerialcat Tractor Drawn Aerial

   2. Three different invoices were provided.
         Fire Trucks Plus, Inc. Invoice No. 42208, dated April 22, 2008[4]
             o 1992 Pierce Lance 105’ Tractor Drawn Aerial
             o Unit Price $100,000
             o Refurbish aerial $117,000
             o 8% Sales Tax $8,000
             o Total $225,000
         Fire Trucks Plus, Inc. Invoice No. 42208, dated April 29, 2008[5]
             o 1992 Pierce Lance 105’ Tractor Drawn Aerial
             o Unit Price $85,000
             o Training, delivery, pump test, UL test, lettering, inspection trip $15,987.50
             o Refurbish aerial $117,000
             o 8.25% Sales Tax $7012.50
             o Total $225,000
         Fire Trucks Plus, Inc. Invoice No. 9372010, dated December 8, 2010[6]
             o KME Tractor 100’ Aerialcat Tractor Drawn Aerial
             o Unit Price $85,000
             o Training, delivery, lettering, 2nd inspection trip $15,987.50
14 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



              o Refurbish aerial $117,000
              o Sales Tax $7012.50
              o Total $225,000

   3. Fire Trucks Plus, Inc. Statement, dated December 8, 2010[7]
          KME 100’ Aerialcat Tractor Drawn Aerial
          Unit Price $225,000
          Marked “Paid in Full Check No. 157619”

   4. City of Watsonville Purchase Requisition, dated April 29, 2008[8]
          1992 Pierce Lance 105’ Tractor Drawn Aerial
          Approved by Council Resolution #61-08 (CM), attached to requisition
          Memorandum from the Fire Chief to the City Manager, included as a staff report to
          the City Council for approval of the purchase, dated April 22, 2008, and “Attachment
          1: Aerial Ladder Truck Specifications,” referring to the KME,[10] attached to the
          requisition
          Fire Trucks Plus, Inc. Invoice No. 42208, dated April 22, 2008, attached to
          requisition
          Marked “Material or Services Received, Invoice Attached for Payment” (The truck
          was not received)

   5. City of Watsonville Check No. 157619, dated April 29, 2008, for $225,000[9]
          1992 Pierce Lance 105’ Tractor Drawn Aerial Ladder truck
          Invoice No. 42208

   6. Two different sets of specifications for the vehicle were provided to the Grand Jury as
      attachments to a memorandum from the Fire Chief to the City Manager, included as a
      staff report to the City Council for approval of the purchase, dated April 22,
      2008.[10][11][12]
          The memorandum describes the truck to be purchased as a “sister unit to our existing
          truck” (which is a 2001 KME Tractor Drawn Aerial).
          “Attachment 1: Aerial Ladder Truck Specifications” consists of three pages referring
          to the KME and includes the statement, “Vehicle is in excellent condition.”[10]
          “Attachment 1: Aerial Ladder Truck Specifications (Revised)” consists of three
          pages, two referring to the Pierce Lance and one referring to the KME, and includes
          the statements, “Aerial is in excellent condition” and “Vehicle is in excellent
          condition.”[11]

   7. There was no written contractual agreement between the parties; therefore, the $225,000
      is at risk.

   8. There are no detailed written contractual specifications for the $117,000 refurbishment.

   9. There are no written contractual documents describing the change from the Pierce to the
      KME.

   10. Different condition reports and value assessments are reported for the KME.
                                                                          City of Watsonville ∫ 15



           From a City of Pasadena Agenda Report to the Mayor and City Council, dated
           December 14, 2009, to authorize a contract with Fire Trucks Plus, Inc. to exchange a
           1999 KME for a 1992 Seagrave Ladder Truck (a three-way trade to make the KME
           available to Watsonville), referring to the KME:[13]
            In the last five years, maintenance and repairs have resulted in the vehicle
            being out of service 37% of the time. In comparison, over the same period,
            the City's other ladder trucks have been out of service only 15% of the
            time, even though they are older vehicles. This has forced the City to place
            the KME in reserve status and use the reserve ladder truck for front line
            duty. Due to safety issues, reliability, out of service time, unit size, and the
            issue of major component failure, the KME has not met the needs of the
            Pasadena Fire Department.
            The KME cannot be resold at auction for reuse by a municipal Fire
            Department because it does not meet current NFPA standards. It is
            estimated that it will only bring approximately $20,000 (bold and
            underlined for emphasis) at a public bid. Parties interested in obtaining
            the KME through a sealed bid sale are limited and would likely result in
            a low ball offer due to the work and cost needed to upgrade and repair
            the unit for resale.
           The staff reports described in Item 6 (above) from the Watsonville Fire Chief to the
           City Manager state the “vehicle is in excellent condition.”[10][11]
           The Watsonville Fire Chief, in an April 2010 newspaper article, states the appraised
           value of the vehicle is $265,000 to $379,000.[15]

   11. Conflicting documents were provided showing transfer of ownership by Fire Trucks Plus,
       Inc. to the City of Watsonville before the release of ownership by the City of Pasadena.
           Transfer from Fire Trucks Plus, Inc. to City of Watsonville on December 8, 2010
           [17][18]

           Transfer from City Of Pasadena to Fire Trucks Plus, Inc. on December 16,
           2010,[14][16] (approved by Pasadena City Council on December 14, 2009)

   12. It is unknown if the procurement process followed by the City is in compliance with
       Federal requirements for the use of Community Development Block Grants.

   13. No firm delivery date has ever been provided by Fire Trucks Plus, Inc.

   14. Two E-mails from the Fire Chief to Council Member Martinez with differing information
       regarding delivery.[22][23]

In summary:
    ● The City paid $225,000, without a contract, in April 2008 for a truck they preferred not to
      buy.
    ● The truck they hoped to buy was not in the possession of the broker who accepted
      payment.
16 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



      ● The truck they hoped to buy was not available for purchase until December 2010, more
        than two and one-half years after they paid the $225,000.
      ● The City did not take title to the truck they hoped to buy until December 2010, more than
        two and one-half years after they paid the $225,000.
      ● The City has not taken delivery of the truck more than three years after they paid the
        $225,000.

It appears the City does not follow a “best practices” purchasing procedure. The documents
described above do not demonstrate that the City processes conform to the “Purchasing and
Contracting Practices” section of “Financial Management for Elected Officials: Questions to
Ask,” published by the Institute for Local Government,[26] and resource documents at the
California Society of Municipal Finance Officers website.[25]

The Grand Jury believes the procedure followed by the City fails to demonstrate responsible use
of public funds. None of the nine present or former City Council member interviewees had any
knowledge of the current delivery status of the truck. Several said they asked Staff for updates at
City Council meetings, but have not received adequate information.

Finally, on February 8, 2011, the Fire Chief wrote a memorandum to the City Manager that gave
his account of the complete transaction.[24] The Grand Jury does not understand why this
information was not fully disclosed at the start of the transaction, or why there were three years
of smoke and mirrors.

Findings
F1.     The purchasing procedure used by the City to buy the fire truck appears ad hoc and
        incomplete. It bypasses commonly used financial controls that would protect the buyer and
        provide accountability of public officials.

F2.     The fire truck transaction appears suspect due to contradictory documents.

F3.     The City Manager has not provided the City Council with regular updates that reflect
        changes in the fire truck transaction in the three years since the issuance of the payment.

Recommendations
In order to ensure transparency, completeness and accuracy in the information provided to the
City Council, City Commissions and the public, the Grand Jury recommends:

R1. The City Manager should make regular reports to the City Council, in open session,
    regarding the performance of significant contracts, i.e., $50,000 or greater.

R2. The City should adopt a “best practices” government procurement policy. The California
    Society of Municipal Finance Officers is a particularly useful resource for the development
    of such a policy.[25]

R3. City Staff with purchasing authority and responsibility should receive adequate training to
    successfully execute contracts and process transactions.
                                                                            City of Watsonville ∫ 17



                        Environmental Health Investigation
The Grand Jury discovered that the City of Watsonville has no policies or procedures in place to
check for environmental hazards for any given development site prior to the issuance of land use
or building permits.

Most of the pertinent documents related to this investigation may be reviewed in various
locations throughout the EnviroStor web page for “PG&E, WATSONVILLE #1 MGP
(44490007).”[36]

The site investigated is located at 618 Main Street in Watsonville. Extensive past environmental
investigations have identified hazardous residues in the soil resulting from historical operations
at the site. The contaminants identified in the reports are known to cause cancer or birth defects
and include polynuclear aromatic hydrocarbons, petroleum hydrocarbons, arsenic, and
hexavalent chromium. It was also determined that, as a result of the contamination, the
“groundwater presents an unacceptable threat to human health and safety.”[27][36]

The site is located within the historic footprint of the Watsonville-1 Manufactured Gas Plant,
which operated from 1871 until 1906. The plant used coal and oil to produce gas for lighting,
heating and cooking. Some of the hazardous byproducts from the manufacturing process remain
at the site. Pacific Gas and Electric Company (PG&E) eventually took over ownership of the site
and used it as a customer service facility until 1989, when it was leased to its present owner and
converted into a restaurant (Jalisco).[36]

The site was purchased by its present owner from PG&E on February 27, 2001, subject to a
recorded “Covenant to Restrict Use Of Property, Environmental Restriction,” which was found
to be “reasonably necessary to protect present or future human health or safety or protect the
environment as a result of the presence on the land of hazardous materials as defined in Health &
Safety Code section 25260.” The ongoing environmental investigation at the site is under the
supervision and authority of the California Department of Toxic Substances Control (DTSC)
(Department).[27][28][36]

The restrictions described in the Covenant include prohibited uses (residence, hospital, school or
day care), prohibited activities (raising of food or extraction of groundwater for consumption)
and requirements for soil management:
               4.02 (a) “No activities that will disturb the soil (e.g., excavation, grading,
               removal, trenching, filling, earth movement or mining) shall be allowed on
               the property without a Soil Management Plan and a Health and Safety
               Plan approved by the Department.”
               4.02 (b) “Any contaminated soils brought to the surface by grading,
               excavation, trenching or back-filling shall be managed in accordance with
               all applicable provisions of state and federal law.”
The Covenant further mandates an interim remedial measure to prevent the release of hazardous
substances from the contaminated soil. This includes maintaining the current asphalt parking lot,
commercial building and other structures on the property, which are referred to as the “Cap.”
18 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



               4.04 (a) “Activities that may disturb the Cap (e.g. excavation, grading,
               removal, trenching, filling, earth movement, or mining) shall not be
               permitted on the Capped Property without prior review and approval by
               the Department.”
Furthermore, sections 3.01 and 3.02 of the Covenant stipulate that the restrictions “run with the
land,” and are “binding upon owners/occupants.” All owners and future owners of the property
are required to adhere to the provisions of the Covenant.[27][36]

The Grand Jury found that on two specific occasions, the Watsonville City Government failed to
discover or provide information highlighting the fact that there are hazardous materials present
on the site.

On June 18, 2007, the City of Watsonville issued a “Correction Notice,” due to the start of
construction, without a permit, of a courtyard seating area at the site.[29][36] After the city issued
the correction notice, all required applications and plans were submitted, permits were obtained,
and building inspections were performed.[30] However, NO assessment of the land use
restriction or presence of hazardous materials was considered.

On March 4, 2008, the Watsonville Planning Commission approved a Special Use Permit
allowing liquor sales and special events on an outdoor patio at the site. The staff report included
the finding that “Jalisco’s Restaurant has operated in its present location for 19 years. An 800
square foot patio was added to the restaurant for food service in the summer of 2007.” The staff
report failed to provide any information concerning the environmental hazards and risks on the
site.[31]

In 1996 the California Environmental Protection Agency designated Santa Cruz County
Environmental Health Services (EHS) as the "Certified Unified Program Agency" (CUPA)
within the geographic boundaries of the County (including all four Cities). As the CUPA, EHS is
responsible for enforcing State and Federal statutes and regulations as well as any applicable
local ordinance.[32] However, since the City of Watsonville failed to discover the hazard or the
land use restriction, EHS was not notified, and was unable to act in its capacity as the CUPA.
EHS staff who were interviewed also stated that Watsonville City staff rarely contact them for
advice or assistance.

There are various databases available to the public online, that identify sites with known or
suspected hazardous materials contamination. The Grand Jury easily found the site located at 618
Main Street listed on “EnviroStor,”[36] and “GeoTracker.”[38] EHS maintains a website with a
link to known contaminated county sites, titled “Santa Cruz County ‘Site’ List.”[37] Nearly 700
county sites are identified on the list, including approximately 100 in the City of Watsonville
alone. The site at 618 Main Street appears on the list and was also found in the “Fortis”
document file maintained at EHS.

The Watsonville Community Development Department staff first became aware the site was
contaminated when they were interviewed by the Grand Jury. They were unaware of the land use
restriction and the presence of hazardous materials on the site. They do not routinely make
inquiries regarding these issues when processing permits.
                                                                             City of Watsonville ∫ 19



There was disagreement amongst the interviewees from different departments, commissions and
the City Council as to whether the permit process needed to be revised to include a routine check
of soil and groundwater contamination databases prior to issuance of a permit.

It appears that the site construction activities permitted by the City of Watsonville caused an
unauthorized release of hazardous materials. The Grand Jury notified EHS of a potential release;
EHS subsequently referred the notification to the DTSC, the lead cleanup oversight
agency.[33][34][36] The DTSC replied, “the disturbance of the soil...did not likely have any impacts
on the public, workers who performed the construction, or the environment,” and that it would
take no enforcement action at this time. However, it did direct that any future activities on the
site that cause soil disturbance must be performed in accordance with the requirements of the
Covenant.[35][36]

Nevertheless, the Grand Jury maintains that the City of Watsonville permit procedures fail to
recognize existing documented soil and groundwater contamination hazards that pose potential
risks to public health and safety.

Findings
F4.   The City of Watsonville Community Development Department issues land use and
      building permits without consideration of the presence of hazardous materials or recorded
      land use restrictions.

F5.   No permit application review procedure exists at the Community Development
      Department to identify known documented hazardous materials sites.

Recommendations
R4. In collaboration with EHS, the City of Watsonville Community Development Department
    should develop a procedure to alert staff to the presence of hazardous materials on a site
    prior to the issuance of land use or building permits.


                                   Airport Investigation
The Watsonville Municipal Airport is a lightning rod issue and is very divisive in the
Watsonville community. Many Watsonville residents, including several members of the City
Council, see no value in the Airport and would like it converted to affordable housing. On the
other side are business leaders, the Watsonville Pilots Association, the Farm Bureau, and others,
who support retaining the full capabilities of the Airport.

The divisiveness of this issue is even underscored internally within the City. In direct contrast to
the City Council majority opinion, the Airport’s benefits to the community, including economic,
are touted and well documented on the City’s Economic Development Website “Watsonville
Municipal Airport.”[39]

Over the past five years, costly litigation over land use issues in areas surrounding the Airport
has exceeded $1.2 million of limited City funds. The City is now embarking on a project to re-
adopt its 2030 General Plan[40] to address deficiencies found by the California Superior Court.[41]
20 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



With the City facing a pending budget deficit of $1.9 million, the Grand Jury believes the City
Council should have a full public discussion of the airport issues and potential costs, solutions,
and compromises, before proceeding down the path of another round of costly litigation.

The Grand Jury has found that on matters concerning the Airport, the City Government has
failed to act in a manner that is transparent, and failed to make decisions based on complete and
accurate information.

A chronology of events relating to the Airport over the past six years is as follows:

   1. A 2005-2006 Santa Cruz County Grand Jury Investigation was prompted by the City
      Council’s adoption of Resolution 74-05[42] on April 12, 2005, which amended the City’s
      Airport Master Plan 2001-2020, in anticipation of the adoption of the WatsonvilleVISTA
      2030 General Plan.[40]
      The Grand Jury report titled, “Watsonville Municipal Airport: Headed for a Crash,”[43] is
      informative and mostly still pertinent today. The following paragraphs are from this
      report (bolds and underlines added for emphasis):
               Watsonville Municipal Airport is a valuable asset to the City of
               Watsonville and to the entire County of Santa Cruz. While land-use
               planning around most airports is monitored by regional commissions
               specializing in airport issues, a unique loophole in California State law
               permits the Watsonville City Council to serve in this capacity for the
               airport. The airport's existence is now threatened because the city is
               meeting its mandated housing goals by planning housing developments
               in airport safety zones, which could lead to increased noise complaints
               and untold liability in the event of an accident.

               The airport is economically valuable to the city, providing steady
               employment, business opportunities, a substantial tax base, and drawing
               business and recreational visitors. Strategically, the Airport is a key asset
               in low frequency but high impact disaster relief efforts, as was
               demonstrated following the Loma Prieta earthquake. Before any
               irrevocable decisions are made, the benefits of the airport to the entire
               region must be carefully evaluated through the formation of an
               independent Airport Land Use Commission. Such a commission will
               provide an opportunity for community input and to make impartial land
               use decisions more frequently to protect this critical regional resource.

               The Watsonville Municipal Airport was constructed by the Navy during
               World War II on land purchased by, and incorporated into, the City of
               Watsonville. In 1947 the airport was transferred back to the city for $1
               provided the land would be used as an airport in perpetuity. Initial
               construction consisted of two runways, both built to military specifications
               that make them suitable for use by heavy aircraft such as C-130s and
               business jets. Two runways are needed to accommodate weather
               variations. The primary runway, Runway 2-20, is the longest and can be
                                                                      City of Watsonville ∫ 21



           used ninety-four percent of the time. The shorter runway, Runway 8-26,
           can be used ninety-eight percent of the time and is necessary not only
           for wind variations, but particularly in summer fog conditions.

2. During the Santa Cruz County Grand Jury’s 2005-2006 term, several additional airport
   actions occurred, which were not included in the report.
       An April 21, 2006, letter to the City of Watsonville from the California Department
       of Transportation (DOT),[44] included the following statements: “It is our position
       that Resolution 74-05 should be invalidated,” (bold and underlined for emphasis)
       and “If the City of Watsonville does not intend to implement the State’s request in
       complying with the State Aeronautics Act, please consider the subject letter as a
       request for an administrative appeal.” The City took no action on this letter.
       On May 23, 2006, the City Council adopted Resolution 114-06 (CM),[45] certifying
       the final Environmental Impact Report (EIR) for the WatsonvilleVISTA 2030 General
       Plan, and Resolution 115-06 (CM),[46] adopting the WatsonvilleVISTA 2030 General
       Plan and Findings. These resolutions incorporated the disputed Resolution 74-05[42]
       into the General Plan, despite the DOT’s position.

3. Since the Grand Jury Report was issued in June of 2006, additional activities concerning
   the airport have taken place.
       Two cases were filed and litigated: “Santa Cruz County Superior Court CV 154571,
       Watsonville Pilots Association et al., v. City of Watsonville, et al.,”[47] and “Santa
       Cruz County Superior Court CV 154572, Friends of Buena Vista, et al., v. the City of
       Watsonville et al.,”[48]
       On March 21, 2008, the Court “issued a statement of decision,” signed by Superior
       Court Judge Paul P. Burdick, in favor of the plaintiffs in both cases.
       On May 2, 2008, the Santa Cruz County Superior Court “entered judgment” for the
       plaintiffs, and issued a Peremptory Writ of Mandate,[49] “YOU ARE HEREBY
       COMMANDED...to set aside the certification of the Environmental Impact
       Report...and all your decisions, approvals and findings for the Watsonville Vista 2030
       General Plan.” A key provision of the Writ is,
           3. You are prohibited from implementing the Watsonville Vista 2030
           General Plan or Resolution 74-05 (bold and underlined for emphasis) or
           basing any action on or engaging in any activity pursuant to the
           Watsonville Vista 2030 General Plan or Resolution 74-05, unless and
           until the environmental review and the Watsonville Vista 2030 General
           Plan and Resolution 74-05 are revised to comply with the Court’s
           Statement of Decision, and California law, including but not limited to its
           statutes and regulations known as the California Aeronautics Act, the
           California Environmental Quality Act ("CEQA") and the CEQA
           Guidelines and the Court is satisfied that you have complied with this
           peremptory writ of mandamus by way of a return to the writ.[49]
       The City of Watsonville appealed the ruling to the Court of Appeal of the State of
       California Sixth Appellate District on June 26, 2008.
22 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



           On March 15, 2010, the Court of Appeal of the State of California Sixth Appellate
           District denied the City's appeal,[50] required it to follow the trial court’s Peremptory
           Writ of Mandate, and further required the City to develop a Compliant Airport Land
           Use Compatibility Plan (ALUCP) consistent with the California Airport Land Use
           Planning Handbook.
           From interviews and documents provided by the City,[51] the Grand Jury discovered
           the City was required by the Court to pay $691,837.84 to the plaintiffs for their legal
           fees. The City also paid $442,346.10 to its own attorneys for the defense of the suit,
           for a total expenditure of $1,134,183.94.

   4. While these legal actions were underway, the Planning Commission received an
      application for a permit for a commercial building to be located next to the airport. On
      August 4, 2008, the Planning Commission approved a special use permit for a 43,389
      square foot light industrial building on Jennings Drive. The project became known as
      “Lawton.” The approval followed discussion and review of the information in the form of
      a Memorandum provided by City Staff.
      However, the City Staff failed to provide the following information to the Planning
      Commission:
         The Memorandum to the Planning Commission[52] makes no mention of the Writ of
         Mandate[49] affecting the property, which states, “You are prohibited from
         implementing the Watsonville Vista 2030 General Plan or Resolution 74-05.”
         (bold and underlined for emphasis)
         The Memorandum mentions “A Mitigated Negative Declaration,” but does not
         include the original negative declaration letter from the DOT,[53] which cites the
         Superior Court decision, and includes the statement, “Portions of the project site
         appear to be within the Safety Zones 1, 2, 3, and 6 for the Watsonville Municipal
         Airport.”
         A City letter attempted to mitigate the negative declaration,[54] but their letter had not
         been accepted by the DOT by the date of the meeting. This fact was not
         communicated to the Planning Commission by the City staff. Subsequent to this
         meeting, the DOT issued a letter[55] which includes the statement, “We further request
         that the Negative Declaration not be approved.”
         The Minutes of the Planning Commission meeting[56] include the statements,
         “Commissioner Martinez...” (Planning Commissioner at that time) “...noted the close
         proximity of the Airport to the project,” and “Principal Planner Boyle stated the
         proposed use is allowable in Zone 6 and is consistent in both General Plans.” Planner
         Boyle’s statements fail to inform the Commission of the DOT claims that the project
         is in Zones 1, 2, 3 and 6, or of the Writ of Mandate which prohibits the
         implementation of the WatsonvilleVISTA 2030 General Plan.

It is not possible to know how the Planning Commission would have acted if they had received
full information. They may have elected to approve the permit, they may have denied it, or they
may have continued the matter and requested further information.

The Watsonville Pilots Association and others subsequently filed suit[57] to stop the project, since
it was in direct violation of the Peremptory Writ of Mandate issued on May 2, 2008. The Lawton
                                                                            City of Watsonville ∫ 23



Project was eventually dropped by the applicant due to the suit, and the City of Watsonville and
the Watsonville Pilots Association negotiated a settlement to the suit. From interviews and
documents provided by the City,[51] the Grand Jury discovered the City paid $48,000 to the
plaintiffs for their legal fees. The City also paid $12,048.78 to its own attorneys for the defense
of the suit for a total expenditure of $60,048.78.

To summarize,
   ● In the first lawsuit, the city ended up paying $1.134 million in legal fees
   ● In the second lawsuit, the City settled and ended up paying another $60 thousand in legal
      fees.

Findings
F6.   The full costs of litigation to justify future development surrounding the airport have not
      been disclosed to the public.

F7.   The City has spent over $1 million in scarce funds on litigation resulting from attempts to
      increase development around the airport.

F8.   City Staff has repeatedly failed to provide complete and accurate information to the City
      Council, Planning Commission, and the public.

Recommendations
R5. The City Council should have a public discussion regarding future development
    surrounding the airport, including full disclosure by City Staff of all issues and potential
    costs, solutions, and compromises, to avoid another round of costly litigation. This public
    discussion should be held prior to development of the revised City General Plan 2030.


                       Redevelopment Agency Investigation
The City Manager, the recently retired Director of Redevelopment and Housing, and other senior
city executives, both elected and staff, have made many public statements[58][59][60] concerning
the importance of redevelopment funds to the City of Watsonville. Their statements emphasize
how damaging the elimination of the Watsonville Redevelopment Agency (WRDA) would be to
the city. There has been much discussion of Redevelopment Agencies (RDAs) since California
Governor Brown’s recent proposal to eliminate them.

The Grand Jury attempted to investigate the history of the WRDA to find quantifiable measures
to evaluate its effectiveness, such as a list of projects undertaken; project costs and status;
WRDA annual revenues and expenses; and bond obligations. The Grand Jury was never able to
find this information.

As of the start of our investigation, there was no publicly available information on the
effectiveness of the WRDA. The Grand Jury reviewed the Watsonville “Redevelopment Housing
Economic Development” website[61] and found none of the information we were attempting to
obtain. Additional City websites were investigated for information concerning the WRDA.
24 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



Several reports were found that contain partial information.[61][62][63][64][65] City Staff interviewees
informed the Grand Jury there was no simple way to obtain this information. Interviewees were
able to name only five or six WRDA completed projects over the nearly thirty-year life of the
agency. We were also told that it would take an effort by staff to look through “paper files” to
provide us with a list of WRDA projects over the past five years. In addition, some City Staff
members were dismissive and contemptuous of the Grand Jury’s attempt to obtain such
information.

We investigated neighboring county and city governments’ RDA websites to see if the type of
information we had requested of the City was available online. We found that the websites of the
County of Santa Cruz,[66] the City of Santa Cruz[67] and the City of Morgan Hill[68] all contain
excellent and easy-to-understand information that helps the public to understand the
effectiveness of their RDAs.

Findings
F9.   It was not possible to evaluate the effectiveness of the WRDA because adequate
      information is not provided to the public.

F10. The City of Watsonville does not provide a publicly available summary of WRDA
     activities, revenues, or expenses.

Recommendations
R6. The City of Watsonville should publish on its website, a current record of activities of the
    WRDA, including projects proposed, approved, in progress, and completed, along with
    related revenue, bond obligations and expense information.


                                 Manabe-Ow Investigation
On October 26, 2010, the City Council passed resolution 174-10[69] approving the Manabe-Ow
Specific Plan (MOSP)[70] amid a sea of sign-waving young citizens chanting, “We Need Jobs.”[71]
The City considers the Manabe-Ow Project key to its strategy for employment, because it
projects over 2,000 new jobs over the next twenty years. The project consists of the development
of a 95-acre industrial area in the southern part of the City. “The MOSP represents the
culmination of the City's extensive efforts to create a new job base for the community. The City
of Watsonville has been actively pursuing a new industrial area to provide new jobs for the
residents of the City for the past 15 years.”[72]

The Grand Jury supports the City and citizens of Watsonville in their political processes, and
does not have an opinion concerning the appropriateness of the Manabe-Ow Business Park
project. The Grand Jury is concerned with the completeness and accuracy of background
information regarding project financing that was provided by City Staff to the public, the
Planning Commission and the City Council, prior to the passage of Resolution 174-10.

At the October 26, 2010, City Council Meeting,[71] the Interim Community Development
Director presented the Manabe-Ow Staff report.[72] Financing was not discussed at the
                                                                             City of Watsonville ∫ 25



meeting;[69] however, the report included several references to financing and financing
alternatives:
               The buildout of the Specific Plan for the site is anticipated over a 20 to 25
               year time frame, with initial phases not occurring until the economic
               conditions improve [72] (bold and underline added for emphasis)
               The City desires to obtain infrastructure grant funding in order to
               pursue the first phasing option in the Plan [72]
               (bold and underline added for emphasis)
               The Plan identifies options for financial vehicles for public and private
               partnerships necessary to help move the project forward[72]
               (bold and underline added for emphasis)
               A Development Agreement is also under review but will take additional
               time to determine potential financial impacts that can only be determined
               as more detailed tentative map plans are prepared for the project if the
               Specific Plan is approved, and grant funding options become more
               clear.[72]
               There is an unknown financial impact of adopting this Plan at this time.
               The City will be pursuing grant funding to help with the implementation
               of infrastructure identified in the Plan.[72]
               (bold and underline added for emphasis)

At the December 14, 2010, City Council Meeting,[73] the Redevelopment and Housing
Department Director presented a staff report[74] which painted a significantly different picture
from the October 26 report, concerning Manabe-Ow financing. This report and the City Council
discussion were dedicated entirely to project financing. The report contained the following
highlights on financing:
               Construction of the business park requires significant infrastructure
               investment[74]
               Infrastructure costs alone are expected to be approximately $31
               million.[74]
               As a result of the need for major up-front investment in infrastructure, the
               Property is too expensive for a private party to develop on its own, and a
               public-private partnership is necessary.[74]
               Redevelopment assistance is essential to bring this project to fruition.[74]
               Under current redevelopment law, the Property does not meet the strict
               definition of blight, despite its presence in the flood plain, as it is
               undeveloped agricultural land. As the condition of the Property does not
               fall within the definition of blight, a legislative amendment is presently the
               City’s only option for including the property in the Redevelopment Project
               Area.[74]
               It is unlikely that the Manabe-Ow Business Park will be built without
               assistance from the Redevelopment Agency.[74]
26 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



               The potential cost of not pursuing a legislative amendment in terms of lost
               economic opportunity is substantially greater than the cost of making the
               effort.[74]

The above staff report[74] suggests City Staff had long known and planned to use the WRDA as
the primary and preferred financing mechanism for the Manabe-Ow project, ignoring the other
seven alternatives described in the MOSP. This information was not specifically provided to the
City Council at the October 26, 2010, meeting. It is not possible to know how the City Council
would have acted if they had received full information.

When the Grand Jury asked some City and Staff interviewees about the omission of financing
options and the need for legislative action, their response was contemptuous and dismissive. The
Grand Jury was told that the need for redevelopment funds, combined with the need for special
legislative action, was well known by all stakeholders and had been fully vetted in public
documents and hearings.

The Grand Jury attempted to verify the veracity of the statement by City and Staff by
interviewing seven of the listed Council Members and five of the listed Planning Commission
Members, who were listed as stakeholders in the MOSP.[70] When directly asked, none of these
participants interviewed were aware of the needs discussed in the staff report on financing.[74]

The Grand Jury also reviewed available public documents[70][75][76][77][78][79] regarding this project.
None of the documents describes the need for Redevelopment Funds, combined with the need
for special legislative action, as specified in the staff report on financing,[74] and as asserted by
City Staff.

As of the date of submission of this report, the financing of the Manabe-Ow project is still in flux
due to the uncertainty of the availability of RDA funding.

Findings
F11. The City Council failed to fully consider project costs prior to Manabe-Ow project
     approval.

F12. The City Staff misrepresented the plans to finance the Manabe-Ow project prior to the City
     Council’s approval in 2010.

F13. The City Staff favored securing WRDA funding to finance the project but withheld this
     information from the City Council and the public prior to project approval.

F14. City Staff withheld information regarding the requirement for legislative action to include
     the Manabe-Ow property in the WRDA prior to project approval.

Recommendations
R7. The City Manager should implement a process to ensure transparency, completeness and
    accuracy in the information provided to the City Council, City Commissions and the
    Public.
                                                                          City of Watsonville ∫ 27



R8. The City Council should exercise due diligence and demand that it receives adequate
    information to make informed decisions. “Financial Management for Elected Officials:
    Questions to Ask,” published by the Institute for Local Governments is a useful
    resource.[26]

R9. The City Council should have a public discussion of the Manabe-Ow project with full
    disclosure of all funding options.


Commendations
With a population nearly equal to that of the City of Santa Cruz (51,000 versus 58,000), the City
of Watsonville has an annual budget of only $39 million, compared to $100 million for the City
of Santa Cruz. The City of Watsonville justifiably prides itself for the level of services they
provide on a very low budget. City employees have accepted salary reductions, reductions in
hours, and furloughs, and many have assumed additional duties without additional compensation.

Responses Required
                                                                          Respond Within/
   Respondent               Findings          Recommendations
                                                                            Respond By

City of Watsonville     F1-F8, F10, F12-               R1-R7                   60 Days
   City Manager               F14                                         September 1, 2011

City of Watsonville          F9, F10                     R6                    60 Days
 Redevelopment                                                            September 1, 2011
      Agency
Executive Director

City of Watsonville      F4-F6, F10-F11            R2-R6, R8, R9              90 Days
   City Council                                                            October 1, 2011

City of Watsonville          F9, F10                     R6                   90 Days
 Redevelopment                                                             October 1, 2011
      Agency
Board of Directors



Sources
   1. Hoppin, Jason, “Census: Santa Cruz County growth slow, except for Watsonville,”
      March 9, 2011, accessed June 1, 2011,
      http://www.santacruzsentinel.com/ci_17570923?source=rss_viewed
   2. Bankhead, Steve, “Watsonville’s ‘sweetheart’ loan puzzling,” Santa Cruz Sentinel, July
      18, 2010, accessed: May 23, 2011,
      http://www.santacruzsentinel.com/opinion/ci_15543139
28 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



Fire truck Investigation Sources
   3. City of Watsonville, Community Development Block Grant Action Plan, FY 2007-2008,
       page 18
   4. Fire Trucks Plus, Inc., Invoice No. 42208, April 22, 2008
   5. Fire Trucks Plus, Inc., Invoice No. 42208, April 29, 2008
   6. Fire Trucks Plus, Inc., Invoice No. 9372010, December 8, 2010
   7. Fire Trucks Plus, Inc., Statement for Invoice No. 42208, December 8, 2010
   8. City of Watsonville Purchase Requisition, April 29, 2008
   9. City of Watsonville Check No. 157619, April 29, 2008
   10. Bisbee, Mark. City of Watsonville Fire Department Memorandum to City Manager. April
       16, 2008. Staff report to City Council for April 22, 2008, City Council Meeting
   11. Bisbee, Mark. City of Watsonville Fire Department Memorandum to City Manager. April
       16, 2008. Staff report to City Council for April 22, 2008, City Council Meeting (Revised)
   12. Watsonville City Council Resolution No. 61-08 (CM), adopted April 22, 2008
   13. Public Works Department, City of Pasadena. Agenda Report to Mayor and City Council,
       December 14, 2009
   14. Dandridge, Scott. City of Pasadena Fire Department Memorandum to Paul Batista, Fire
       Trucks Plus, Inc., December 16, 2010
   15. Bisbee, Mark, “Valid reasons behind delay in receiving firetruck,” Register-Pajaronian,
       April 8, 2011, accessed June 1, 2011, http://www.register-
       pajaronian.com/v2_news_articles.php?heading=0&story_id=10544&page=77
   16. City of Pasadena Purchase Order Contract No. 44272, January 14, 2010
   17. DMV Vehicle/Vessel Transfer and Reassignment Form. Bill of Sale – Firetrucks Plus,
       Inc., to City of Watsonville, December 8, 2010
   18. DMV Report of Sale – Used Vehicle. Firetrucks Plus, Inc. to City of Watsonville,
       December 8, 2010
   19. DMV Used Vehicle Dealer Notice/Temporary Identification, December 8, 2010
   20. State of California Certificate of Title. Release of Interest by City of Pasadena, December
       16, 2010
   21. DMV Release of Liability. City of Pasadena to Firetrucks Plus, December 16, 2010
   22. Bisbee, Mark. E-Mail to Emilio Martinez, November 19, 2010
   23. Bisbee, Mark. E-Mail to Emilio Martinez, December 1, 2010
   24. Bisbee, Mark. City of Watsonville Fire Department Memorandum to City Manager,
       February 8, 2011
   25. California Society of Municipal Finance Officers, accessed: May 28, 2011,
       http://www.csmfo.org/
   26. Institute for Local Government, “Financial Management for Elected Officials: Questions
       to Ask,” accessed: May 28, 2011, http://www.ca-ilg.org/financialmanagement
                                                                     City of Watsonville ∫ 29



Environmental Health Investigation Sources
  27. Covenant to Restrict Use Of Property, Environmental Restriction, recorded January 26,
      2001, as Official Records, Series Number 2001-0004343, Santa Cruz County Records
  28. Grant Deed recorded March 22, 2002, as Official Records, Series Number 2002-
      0020753, Santa Cruz County Records
  29. City of Watsonville, Community Development Department, Correction Notice, issued
      June 18, 2007
  30. City of Watsonville, Construction Permit No. BP2007-147, issued August 21, 2007
  31. City of Watsonville, Staff Report and Resolution of the Planning Commission, March 4,
      2008
  32. County of Santa Cruz, Environmental Health Services, Certified Unified Program
      Agency (CUPA), accessed: May 28, 2011, http://sccounty01.co.santa-
      cruz.ca.us/eh/HM/HM01000.htm
  33. Santa Cruz County Grand Jury, letter to Environmental Health Services, February 8,
      2011
  34. Fillmore, Tim, Santa Cruz County Environmental Health Services, E-mail to Department
      of Toxic Substances Control, February 14, 2011
  35. Chui, Henry, Department of Toxic Substances Control, letter to owner of 618 Main
      Street, Watsonville, April 14, 2011
  36. California Department of Toxic Substances Control, EnviroStor web page, accessed: May
      28, 2011,
      http://www.envirostor.dtsc.ca.gov/public/profile_report.asp?global_id=44490007
  37. Santa Cruz County Environmental Health Services web page, Site Mitigation, accessed:
      May 28, 2011, http://sccounty01.co.santa-cruz.ca.us/eh/HM/HM08000.htm
  38. California State Water Resources Control Board, Geotracker web page, accessed: May
      28, 2011,
      https://geotracker.waterboards.ca.gov/map/default.asp?global_id=&senate=&assembly=
      &x=-
      121.7599068&y=36.9135269&zl=15&ms=640,480&mt=m&geotracker_luft=true&geotr
      acker_slic=true&geotracker_landfill=true&geotracker_dod=true&geotracker_ust=false&
      dtsc_cleanup=false&dtsc_permit=false&showdist=true&searchdist=1000&searchaddr=6
      18%20Main%20Street%20Watsonville%20ca

Airport Investigation Sources
  39. City of Watsonville, Watsonville Economic Development, Watsonville Municipal
      Airport web page, accessed: May 28, 2011, http://growinwatsonville.com/why-
      watsonville/airport
  40. City of Watsonville, “ WatsonvilleVISTA 2030 General Plan”, June 2006, accessed: May
      31, 2011
      http://www.ci.watsonville.ca.us/departments/cdd/general_plan/watsonvillevista.html
30 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   41. Tavantzis, Marcela, City of Watsonville Interim Community Development Director,
       Memorandum to Carlos J. Palacios, City Manager, January 19, 2011, “Resolution
       identifying process for re-adoption of the 2030 General Plan and the re-certification of
       the final General Plan Environmental Impact Report to address appeals court ruling”
   42. City of Watsonville, City Council Resolution 74-05, April 12, 2005
   43. 2005–2006 Santa Cruz County Grand Jury, “Watsonville Municipal Airport, Heading for
       a Crash,” accessed: May 28, 2011, http://www.co.santa-
       cruz.ca.us/grandjury/GJ2006_final/2%20-%201%20CCAirport.htm
   44. Frederick, Mary C., Acting Chief Division of Aeronautics California Department of
       Transportation, letter to Keith Boyle, City of Watsonville Community Development
       Dept., April 21, 2006
   45. City of Watsonville, City Council Resolution 114-06 (CM) May 23, 2006
   46. City of Watsonville, City Council Resolution 115-06 (CM), May 23, 2006
   47. Santa Cruz County Superior Court CV 154571, Watsonville Pilots Association et al., v.
       the City of Watsonville
   48. Santa Cruz County Superior Court CV 154572, Friends of Buena Vista et al., v. the City
       of Watsonville
   49. Santa Cruz County Superior Court CV 154571, Watsonville Pilots Association et al., v.
       the City of Watsonville, Peremptory Writ of Mandate, filed May 2, 2009
   50. Court of Appeal of the State of California, Sixth Appellate District, Case H033097,
       Watsonville Pilots Association et al., v. the City of Watsonville et al., Friends of Buena
       Vista et al., v. the City of Watsonville, et al., decision filed March 15, 2010
   51. Flores, Beatriz, City of Watsonville City Clerk, E-Mail to Stephen Johnson, Santa Cruz
       County Grand Jury, May 25, 2011
   52. Doughty, John T., City of Watsonville Community Development Director, Memorandum
       to City of Watsonville Planning Commission, dated July 9, 2009. Subject Special use
       permit (PP2008-39) to allow a master use permit for a 43,389 square foot flexible use
       light industrial building, establishing allowable uses for the building including a 6,500
       square foot cabinet shop on a 6.59 Acre Parcel, at Jennings Drive (500 Buena Vista
       Drive) APN: 015-21-09)
   53. Bolyard, Ron, Aviation Environmental Planner, Division of Aeronautics California
       Department of Transportation, letter to Keith Boyle, City of Watsonville, April 14, 2008.
   54. Boyle, Keith, Principal Planner Community Development Director, City of Watsonville,
       letter to Ron Bolyard Division of Aeronautics Department of Transportation, July 2, 2008
   55. Bolyard, Ron, Aviation Environmental Planner, Division of Aeronautics California
       Department of Transportation, letter to Keith Boyle, City of Watsonville, August 19,
       2008
   56. Minutes, Regular Meeting of the Planning Commission of the City of Watsonville,
       August 5, 2008
   57. Santa Cruz Superior Court (Case CV16150), Watsonville Pilots Association v. City of
       Watsonville (Lawton)
                                                                      City of Watsonville ∫ 31



Redevelopment Agency Investigation Sources
  58. Jones, Donna, “Gov. Brown pushes to eliminate local redevelopment agencies: ‘We’ll put
      up a big fight,’ Watsonville official vows.” Santa Cruz Sentinel, January 11, 2011,
      accessed: May 25, 2011 http://www.santacruzsentinel.com/localnews/ci_17062004
  59. Seipel, Tracy, “Local governments seem to be losing battle to keep redevelopment
      agencies,” Santa Cruz Sentinel, March 5, 2011, accessed: May 25, 2011,
      http://www.santacruzsentinel.com/ci_17545196
  60. Guild, Todd, “Redevelopment director retiring,” Register-Pajaronian, February 19, 2011,
      accessed: May 25, 2011, http://www.register-
      pajaronian.com/v2_news_articles.php?heading=0&story_id=10289&page=72
  61. City of Watsonville, Redevelopment, Housing, and Economic Development, accessed:
      May 28, 2011, http://www.ci.watsonville.ca.us/departments/hedd/rhddepartment2.html
  62. Watsonville 2000 Redevelopment Project, Implementation Plan 2010-11 through 2014-
      15, December 8, 2009, accessed: May 28, 2011,
      http://www.ci.watsonville.ca.us/departments/hedd/implementation_plan.pdf
  63. City of Watsonville Biennial Budget, 2009-2011 Budget, Redevelopment and Housing
      Department (p 295-312), accessed: May 28, 2011,
      http://www.ci.watsonville.ca.us/departments/finance/2009_11Budget/redevelopment_hou
      sing.pdf
  64. City of Watsonville Biennial Budget, 2010-2011 Approved Budget, Redevelopment and
      Housing Department (p 127-140),accessed: May 28, 2011,
      http://www.ci.watsonville.ca.us/departments/finance/2010_11Budget/Redevelopment_Ho
      using.pdf
  65. Redevelopment Agency of the City of Watsonville, California, Annual Financial Report
      for the Fiscal Year Ended June 30, 2010 (p 1-49), accessed: May 28, 2011,
      http://www.ci.watsonville.ca.us/departments/finance/RDA-FS_2009-10.pdf
  66. Santa Cruz County Redevelopment Agency, accessed: May 28,
      2011,http://sccounty01.co.santa-cruz.ca.us/red/index.html
  67. Santa Cruz Redevelopment Agency, accessed: May 28, 2011,
      http://www.cityofsantacruz.com/index.aspx?page=445
  68. Welcome to the Morgan Hill Redevelopment Agency, accessed: May 28, 2011,
      http://www.morganhillrda.ca.gov/index.html

Manabe-Ow Investigation Sources
  69. City of Watsonville, City Council Resolution 174-10 October 26, 2010
  70. Manabe-Ow Specific Plan December 2010, accessed: May 28, 2011,
      http://www.ci.watsonville.ca.us/departments/cdd/manabe_ow/Final_Manabe_Ow_Specifi
      c_Plan_Dec_2010.pdf
  71. City of Watsonville, City Council Meeting, October 26, 2010, DVD 1 of 1 (provided by
      City Clerk)
32 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   72. Tavantzis, Marcela, City of Watsonville Interim Community Planning Development
       Director, Memorandum “CONSIDER SPECIFIC PLAN AND MASTER EIR FOR THE
       MANABE OW BUSINESS PARK...” to Carlos Palacios, City Manager, October 25,
       2010, Staff Report for the October 26, 2010, City Council Meeting
   73. City of Watsonville City Council Meeting, December 14, 2010, DVD 1 of 1, provided by
       City Clerk
   74. Ackerman, Marty, City of Watsonville Redevelopment and Housing Director,
       Memorandum “AUTHORIZATION FOR CITY STAFF TO PURSUE LEGISLATIVE
       ACTION ENABLING THE CITY COUNCIL TO ADD THE MANABE-OW
       PROPERTIES TO THE WATSONVILLE 2000 REDEVELOPMENT PLAN” to Carlos
       Palacios, City Manager, November 29, 2010, Staff Report for the December 14, 2010,
       City Council Meeting.
   75. Watsonville 2000 Redevelopment Project, accessed: May 28, 2011,
       http://www.ci.watsonville.ca.us/departments/hedd/implementation_plan.pdf
   76. Manabe-Ow Technical Advisory Committee (TAC): Meeting Minutes May 14, 2007;
       June 11, 2007; August 13, 2007; September 10, 2007; October 8, 2007; February 11,
       2008; March 10, 2008
       http://www.ci.watsonville.ca.us/departments/cdd/tac_manabe_ow.html
   77. Industrial and Office Trends Projections Analysis, Watsonville, California, May 14, 2007
       http://www.ci.watsonville.ca.us/departments/cdd/manabe_ow/070514_meeting_packet.p
       df
   78. City of Watsonville, Planning Commission: Meeting Minutes January 20, 2009; April 22,
       2010
   79. “Manabe-Ow Specific Plan Neighborhood Meeting,” March 19, 2008
   80. Institute for Local Government, “Financial Management for Elected Officials: Questions
       to Ask,” accessed: May 28, 2011, http://www.ca-ilg.org/financialmanagement

Site Visits
       City of Watsonville Airport
       City of Watsonville City Administrative Offices
       City of Watsonville City Council Meetings
       City of Watsonville Fire Department Administrative Office
       County of Santa Cruz Environmental Health Services
       County of Santa Cruz Planning Department
                                                                                                 ∫ 33



                                Back to the Future:
                     Regional Gridlock and Local Planning Paralysis


Summary
The lack of integrative planning between the Regional Transportation Commission and the
planning departments of the county and cities has resulted in deplorable traffic congestion along
the Highway 1 corridor on a daily basis. The Regional Transportation Commission has noted that
one of the fundamental reasons for the congestion is a lack of consensus among the political
stakeholders. The County, which is responsible for the unincorporated areas, and the cities have
chosen not to integrate their transportation plans with those provided by the Regional
Transportation Commission. Therefore, the Grand Jury recommends the transportation sections
of all general plans for the county and cities should be written by the Regional Transportation
Commission.

Definitions
   ● AB 32: Assembly Bill 32, the Global Warming Solutions Act of 2006.
   ● AMBAG: The Association of Monterey Bay Area Governments. A 24-member board of
     directors comprised of elected officials from each city and county within the region from
     Monterey, San Benito and Santa Cruz counties. AMBAG serves as a federally designated
     Metropolitan Planning Organization and Council of Governments, and is responsible for
     regional collaboration and problem solving. Membership and participation is voluntary.
   ● Caltrans: California Department of Transportation.
   ● RTP: Regional Transportation Plan.
   ● SCCRTC (RTC): Santa Cruz County Regional Transportation Commission. The
     commission is made up of the five county supervisors, one member from each of the four
     incorporated cities in the County and three members appointed by the Santa Cruz
     Metropolitan Transit District Board of Directors. Caltrans serves as a non-voting member
     of the commission. The RTC responsibilities include ensuring improved mobility, access
     and air quality; allocating funding for the transportation system; setting priorities for
     transportation infrastructure; and conducting programs to encourage the use of alternative
     transportation. The RTC develops comprehensive transportation plans for Santa Cruz
     County.
   ● SB 375: Senate Bill 375, passed in 2008, enhancing the ability to reach the goals
     promoted by AB 32.

Background
The Grand Jury initially investigated the fiscal impacts of the proposed acquisition of the rail line
through Santa Cruz County by the RTC. During the course of the investigation, we found
evidence that very little coordination existed between the local jurisdictions and the RTC in the
development of the transportation and housing elements of general plans. Development of the
general plans by local jurisdictions has ostensibly ignored the detailed Regional Transportation
Plan (RTP) developed by the RTC.[1]
34 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



The population of Santa Cruz County has grown significantly in the past four decades, from
123,790 in 1970[2] to 262,382[3] in 2010. Improvements to the primary transportation corridor of
Highway 1 have not kept up with the population growth, resulting in congested traffic conditions
between the cities of Santa Cruz and Watsonville. Although alternative means of addressing this
quagmire have been discussed, no coordinated plan has been implemented by any of the local
jurisdictions.

The local jurisdictions are not accepting the transporting planning leadership provided by the
RTC. The RTC has produced the most robust and comprehensive regional transportation plan to
date,[1] but the other jurisdictions, such as the County of Santa Cruz[4] and cities of Santa Cruz,[5]
Capitola,[6] Watsonville,[7] and Scotts Valley[8] appear to be operating in a vacuum, without
regard to how well their plans integrate with the RTP.[1] This lack of integration across
transportation plans has obstructed the implementation of the improvements to the transportation
corridors that will alleviate current conditions.

Scope
The Grand Jury interviewed personnel of various planning departments, agencies, and local
organizations. Although the interviews were unscripted, we did ask three key questions listed
below at each interview:
   ● What, in your opinion, should be done with the railroad acquisition in the long-term?
   ● How will this affect our long-term population distribution, business location and traffic
     patterns?
   ● Which agency, in your opinion, should be developing and EXECUTING long-term
     development plans in order to take advantage of the railroad acquisition?

The Grand Jury observed that there was a broader issue regarding coordination of transportation
planning between the local jurisdictions and the RTC. Our focus was subsequently redirected to
an investigation of this lack of coordination.

Investigation
There is little disagreement that the current major transportation arteries of Santa Cruz County
are congested during specific windows of time during the day. This condition will worsen in the
future as the aggregate population of the county continues to grow. From the 2010 RTP:[1]
               Many drivers complain about regularly being stuck in traffic. In a
               September 2007 RTC poll of likely Santa Cruz County voters “traffic and
               transportation” tied with “affordable housing/low income housing/cost of
               living” as the most important problem in the region. Area residents pay
               for traffic congestion in a number of ways including wasted time,
               increased air pollution, higher stress levels, fewer visitor dollars, and the
               apparent trend toward more aggressive driving habits. As we plan our
               transportation system for the next 25 years, addressing the seemingly
               intractable problem of traffic congestion is one of our key challenges.

The overarching causes of this problem are straightforward - an increasing number of drivers, a
relative decrease in the rate at which transportation projects are being funded and constructed,
                                                                             Back to the Future ∫ 35



and an ongoing lack of consensus for how to deal with congestion issues. Again, from the 2010
RTP:[1]
               There are three fundamental reasons why traffic congestion is a major
               issue in the county, as well as elsewhere in the state and nation. First,
               more people are driving more miles than ever before and per person
               vehicle registrations are at an all time high. Second, decreases in the
               amount of transportation funding available for local projects has meant
               that our investment in transportation facilities and services has not kept
               pace with growing demands for road space and transportation
               alternatives. Third, there has been a lack of consensus on how to invest in
               our transportation system. To effectively improve mobility for all Santa
               Cruz County residents, it is useful to understand each of these factors.

We gathered background information in an attempt to understand the possible long-term
implications of the railroad purchase in the initial stages of the investigation. While looking into
the environmental and fiscal impacts of different modes of transportation in the county, we also
reviewed the procedural differences of transportation planning among the different jurisdictional
agencies, including the Santa Cruz County Regional Transportation Commission,[1] County of
Santa Cruz Planning Department,[4] City of Santa Cruz Planning Department,[5] City of Capitola
Community Development Department,[6] City of Watsonville Community Development
Department, [7] and the City of Scotts Valley Planning Department.[8]

Many of our initial interviews highlighted the importance of Assembly Bill 32[9] and Senate Bill
375,[10] both of which make a distinct link between the integrated planning for housing and
transportation. Many of those interviewed felt that the first passed bill, AB 32 (Global Warming
Solutions Act of 2006),[9] was too weak with respect to punitive consequences for jurisdictions
that did not comply with the objectives of the bill.

SB 375[10] was passed in 2008, enhancing the ability to reach the goals promoted by AB 32,[9]
which included long range development planning that endeavored to create more sustainable
communities. The bill sets timeline targets for both 2020 and 2035 for the reduction of
greenhouse gas emissions from passenger vehicles. AMBAG is currently working on producing
a regional planning blueprint that incorporates the goals of SB 375 and AB 32 (Envisioning the
Monterey Bay Area: A Blueprint for Sustainable Growth and Smart Infrastructure)[11]. Some
interviewees stated local county and city agencies have delayed updating their transportation
plans in anticipation of the production of a guiding regional planning blueprint by AMBAG. The
RTC is the only county agency that has completed a comprehensive regional transportation
plan[1] that already incorporates most of the goals of both bills, ahead of final production of the
AMBAG “Blueprint.”

In reviewing general plans for both the county[4] and the four incorporated cities[5][6][7][8] within
the county, as well as the 2010 RTP,[1] we observed no evidence of integrated planning between
appropriate entities. For example, none of the existing general plans have substantively
incorporated transportation elements outlined in the RTP.[1] It appears conflicting, narrowly
defined policy objectives are the reason for this lack of integrated planning. As stated in the 2010
RTP:[1]
36 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



               Given the reality of limited funds & the delicate balance between benefits
               and impacts of major and minor projects, strong disagreements about
               priorities have continued to divide the community. At times, public opinion
               is stronger in opposition of transportation options than for them, causing
               a community paralysis that can inhibit compromise. This lack of
               agreement can make it difficult for decision makers to move forward with
               projects acceptable to their diverse constituencies.

A critical component for the creation and implementation of transportation plans is a reliable
source of funding. When the 2010 RTP[1] was created, the RTC assumed that a half-cent sales tax
would be approved by 2012.[1] Their reasoning was that 84% of the population in California live
in areas which have approved local funding measures to address their transportation needs. Sales
taxes require voter approval, which makes this source of funding unreliable. In addition,
fluctuating economic cycles can adversely affect future revenues. The RTC has little long-term
funding for future planning without this assumed funding source.

To summarize, the citizens of Santa Cruz County are burdened with bad traffic congestion along
the Highway 1 corridor on a daily basis, primarily due to the fact that the number of drivers is
growing, while transportation infrastructure improvements have not kept pace. This problem is
driven by a lack of integrative planning and policy consensus between the RTC and the county
and city legislative bodies. The RTC is clearly providing detailed and substantive long-range
transportation planning guidance to the local jurisdictions. However, absent a mandate to
incorporate RTC plans, local jurisdictions do not include comprehensive, up-to-date regional
transportation planning within their general plans.

Findings
F1.   Traffic congestion on Highway 1 corridor is problematic.

F2.   Local jurisdictions do not implement the regional transportation plan created by the RTC.

F3.   Lack of consensus between the local jurisdictions and the RTC staff obstructs the
      coordination of the local transportation plans with the Regional Transportation Plan.

F4.   Each agency’s General Plan is an integrated document that includes housing and
      transportation as elements. There is no mandated link between the local agency’s General
      Plans and the Regional Transportation Plan.

F5.   No consistent long-term funding source is currently available for RTC planning.

Recommendations
R1. Transportation sections of all county and city general plans should be written by Regional
    Transportation Commission staff.

R2. The local jurisdictions should review the transportation sections developed by RTC staff
    for adequacy every two years and RTC staff should be required to revise when necessary.
                                                                             Back to the Future ∫ 37



R3. The RTC should develop cost estimates and pursue stable funding sources to implement
    recommendations one and two.


Commendations
The Grand Jury would like to acknowledge the exceptional work the RTC has accomplished in
creating, and periodically updating, comprehensive regional transportation plans. Their plans
provide a framework for jurisdictions to integrate their local transportation plans with others in
the county.

Responses Required
                                                                               Respond Within/
     Respondent                 Findings             Recommendations
                                                                                 Respond By
  Santa Cruz County                                                                90 days
                                  F1-F4                     R1-R3
 Board of Supervisors                                                           October 1, 2011
  Santa Cruz County
      Regional                                                                     90 Days
                                  F1–F5                     R1-R3
    Transportation                                                              October 1, 2011
     Commission

 County of Santa Cruz             F2-F4                     R1-R2                   60 days
 Planning Department                                                           September 1, 2011

  City of Santa Cruz              F1-F4                     R1-R2                   90 days
     City Council                                                               October 1, 2011

  City of Santa Cruz              F2-F4                     R1-R2                   60 days
 Planning Department                                                           September 1, 2011

  City of Watsonville             F1-F4                     R1-R2                   90 days
     City Council                                                               October 1, 2011

     Watsonville                  F2-F4                     R1-R2                   60 days
     Community                                                                 September 1, 2011
     Development
     Department

 City of Capitola City            F1-F4                     R1-R2                   90 days
       Council                                                                  October 1, 2011
38 ∫ Santa Cruz County Grand Jury Final Report 2010-2011




 Capitola Community             F2-F4                   R1-R2                  60 days
    Development                                                           September 1, 2011
     Department

 City of Scotts Valley          F1-F4                   R1-R2                   90 days
     City Council                                                           October 1, 2011

     Scotts Valley              F2-F4                   R1-R2                  60 days
 Planning Department                                                      September 1, 2011



Sources
   1. Santa Cruz County Regional Transportation Commission, “RTP 2010 - Santa Cruz
       County Regional Transportation Plan,” 2010, accessed: May 21,
       2011,http://www.sccrtc.org/rtp.html#2010RTP
   2. United States Census Bureau, “Population of Counties by Decennial Census: 1900 to
       1990,” 1995, accessed: May 21, 2011,
       http://www.census.gov/population/cencounts/ca190090.txt
   3. United States Census Bureau, “2010 Census Results for California”, 2010, accessed: May
       21, 2011, http://2010.census.gov/2010census/data/
   4. County of Santa Cruz, “1994 GENERAL PLAN and LOCAL COASTAL PROGRAM
       for the COUNTY OF SANTA CRUZ, CALIFORNIA,” December 19, 1994, accessed:
       May 21, 2011, http://www.sccoplanning.com/html/policy/general_plan.htm
   5. City of Santa Cruz, “City of Santa Cruz General Plan 2030,” February 27, 2009,
       accessed: May 21, 2011, http://www.cityofsantacruz.com/index.aspx?page=348
   6. City of Capitola, “City of Capitola General Plan,” September 28, 1989, accessed: May
       21, 2011, http://www.ci.capitola.ca.us/capcity.nsf/ComDevCityGen.html
   7. City of Watsonville, “Watsonville 2005 General Plan,” May 24,1994, accessed: May 21,
       2011, http://www.ci.watsonville.ca.us/departments/cdd/general_plan_05/ch.10.pdf
   8. City of Scotts Valley, “General Plan - 1994,” Chapter 11 – Circulation, April 23, 1993,
       accessed: May, 21, 2011,
       http://www.scottsvalley.org/downloads/planning/GPCirculation.pdf
   9. State of California Assembly, “Assembly Bill No. 32,” September 27, 2006, accessed:
       May 21, 2011, http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-
       0050/ab_32_bill_20060927_chaptered.pdf
   10. State of California Senate, “Senate Bill No. 375,” September 30, 2008, accessed: May 21,
       2011, http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0351-
       0400/sb_375_bill_20080930_chaptered.pdf
   11. AMBAG, “Envisioning the Monterey Bay Area: a Blueprint for Sustainable Growth and
       Smart Infrastructure,” March 2011, accessed: May 21, 2011,
       http://www.ambag.org/programs/blueprint/pdf/blueprint_document.pdf
                                                                                                ∫ 39



       Delinquent Property Tax Penalty Cancellations:
                              “A Day Late and a Dollar Short”


Summary
Who knew?

Have you ever paid a late property tax installment that included an additional 10% penalty? Did
you know there is a County process that allows for the cancellation of the automatic State
penalty?

Where is such information found and for what reasons may these penalties be cancelled?

Due to citizen concern for fairness, transparency, and lack of record keeping of the County’s
waiver system, the Grand Jury sought accountability from the Tax Collector’s office for the
granting or denying of penalty cancellations for delinquent tax payments.

The Grand Jury interviewed employees of various County offices to determine the consistency of
their response to individual requests for relief by late-paying taxpayers, since it appears to vary
with individual circumstances. Are the taxpayers being informed of the different waiver options
available to them?

The Grand Jury found that the Tax Collector’s record keeping appeared inadequate and the
present waiver system inconsistent, with missing documentation and/or waiver forms. To avoid
the appearance of inconsistent application of tax penalty cancellations for delinquent taxpayers,
the Grand Jury recommends that the Tax Collector implement the following improvements:
   ● Publish the process for the cancellation of penalties.
   ● Establish a transparent record keeping process to track delinquent tax penalties granted
     and denied for each fiscal year.
   ● With the Auditor-Controller Office, direct ISD to enable the new IT system to track tax
     penalty cancellation transactions (granted and denied).
   ● Be more transparent in applying the State Code.

Definitions
   ● APN: Assessor’s Parcel Number
   ● Code: State of California Tax and Revenue Code
   ● ISD: Santa Cruz County Information Systems Department
   ● Secured Property: Property in Santa Cruz County secured by real assets such as land,
     buildings, etc.
   ● Tax Collector: Santa Cruz County Tax Collector
   ● Tax Delinquency Penalty: Property Taxes not timely paid are subject to a delinquency
     penalty equal to 10% of the amount of the property tax due plus costs.
40 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   ● Tax Delinquency Penalty Cancellation: The Cancellation of a Tax Delinquency Penalty
     under California Tax and Revenue Code Sections 4952(a, b, c).
   ● Waiver Form: A form filled out by the Tax Collector, which contains the details
     concerning a request for Tax Delinquency Penalty Cancellation.
   ● Waived Penalty: A Tax Delinquency Penalty Cancellation granted by the Santa Cruz
     County Tax Collector under California Tax and Revenue Code Section 4952(a).
     Definitions vary within the County due to the various reasons to cancel tax penalties, thus
     we have avoided using it because of its ambiguity.

Background
Each year, the Santa Cruz County Tax Collector’s office prepares approximately 90,000 property
tax bills for a total billing of $398.8 million. Bills for the regular secured property assessment
roll must be mailed by November 1 and are due in two equal installments. The first installment is
due November 1 and becomes delinquent at the close of business or 5:00 p.m. on December 10.
The second installment is due February 1 and becomes delinquent at the close of business or 5
p.m. on April 10. Every year in early April and early December, Santa Cruz County taxpayers
pay their tax installments before the delinquent dates. The vast majority make their payment on
time by rushing to the County Building or by obtaining the critical US Postal Service postmark.
Some taxpayers miss the deadline and their taxes become delinquent. State law requires a 10%
penalty be assessed for these delinquent taxes.

State law provides that under certain circumstances tax penalties can be cancelled (all references
to a particular “Section” shall mean the Revenue and Taxation Code of the State of California[1]).
Section 4985.2[2] states that any penalty, costs or other charges resulting from tax delinquency
may be cancelled by the auditor or tax collector upon one of the following:
   ● Failure to make a timely payment is due to reasonable cause and circumstances beyond
     the taxpayer's control, and occurred notwithstanding the exercise of ordinary care in the
     absence of willful neglect, provided the principal payment for the proper amount of the
     tax due is made no later than June 30 of the fourth fiscal year following the fiscal year in
     which the tax became delinquent. Subdivision (a) of Section 4985.2.
   ● There was an inadvertent error in the amount of payment made by the taxpayer, provided
     the principal payment for the proper amount of the tax due is made within 10 days after
     the notice of shortage is mailed by the tax collector. Subdivision (b) of Section 4985.2.
   ● The cancellation was ordered by a local, state, or federal court. Subdivision (c) of Section
     4985.2.

Section 2512[3] also provides for penalty relief for payments mailed on time, but delivered after
the deadline, stating, “the remittance shall be deemed received on the date shown by the post
office cancellation mark stamped upon the envelope.”

The Code[2] provides the Auditor or Tax Collector the ability to cancel a tax delinquency penalty
upon a finding that supports subsections 4985.2(a), 4985.2(b), or 4985.2(c) as described above.
                                                Delinquent Property Tax Penalty Cancellations ∫ 41



Scope
Because of the discretion granted the Tax Collector, the Grand Jury was concerned about the
possibility of preferential treatment given to selected taxpayers. After a review of the issue, the
Grand Jury became interested in the tax delinquency penalty cancellation process and carried out
an investigation to answer the following questions:
   1. How many tax delinquency penalties were cancelled in Santa Cruz County over the past
      five years and were there any trends?
   2. What was the total dollar value of these cancelled penalties?
   3. Are controls in place to prevent the growth of tax delinquency penalties cancelled?
   4. Is there a documented process, in the Tax Collector’s Office, for the processing and
      granting of cancellations?
   5. Are all taxpayers treated equally and without the perception of favoritism?

The scope of this report is limited to the question concerning the cancellation of tax delinquency
penalties and the associated processes. We have not considered other functions of the Tax
Collector’s Office; thus, the report should not be used to evaluate all the activities of the Tax
Collector.

Investigation
To start the investigation we contacted the Tax Collector’s Office and the Auditor-Controller’s
Office and requested reports which detailed tax penalty cancellations over the past five years.
The Grand Jury was informed by both departments that no such reports were available. The
Auditor-Controller’s office provided two reports, but they did not meet the investigation’s needs.
The inability to produce the requested reports was blamed on the antiquated tax system software
currently in use.

Tax penalty cancellation information is only filed with the original tax payment documents and
this is filed in batches based on the processing date. The Tax Collector Office does not maintain
a separate reporting system for tax waivers. Any inquiries regarding waivers require a manual
search through the paper files containing all 90,000 tax bills for any given year.

The Grand Jury requested all tax penalty cancellation records for 2010 on January 13, 2011. The
Tax Collector admitted the records were difficult to access with his limited staff. During a site
visit to the Tax Collector’s Office, the Grand Jury observed the filing system and the difficulty of
finding penalty cancellation information. The Grand Jury was informed the records would not be
available until at least April 1, but received them in seven weeks, on March 4, 2011. The Tax
Collector reported that all instructions to office staff regarding tax penalty cancellations were
only given orally; there are no written procedures.

The Grand Jury was unable to find information on the County web page[4] or at any other easily
accessible location concerning the delinquent tax penalty cancellation. In contrast to Santa Cruz
County, other counties, such as Riverside[5] and Contra Costa,[6] have forms available online
which taxpayers fill out to request cancellations of penalties.
42 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



The Grand Jury learned from interviews that some County taxpayers who request penalty
cancellations are denied without being told that the Code allows for cancellations with qualifying
reasons. In other cases, taxpayers who demand appointments with the Tax Collector may get
their penalties cancelled without completing the full process, without adequate documentation, or
having a waiver form attached.

To evaluate the waivers the Grand Jury requested to see all the waivers for fiscal years 2008-09
and 2009-10. For these tax years, of the 1,156 tax penalty cancellations granted, approximately
289 cases were granted by the Tax Collector. The remaining 75% of the cancellations were
granted by the office staff.

Based on the Grand Jury’s request, the Tax Collector provided sixty-eight Assessor’s Parcel
Numbers (APNs) to the Grand Jury that were granted penalty cancellations. The records
provided only covered the dates of August 8, 2009, through July 30, 2010. These included a list
of four APNs which were noted by a letter from the Tax Collector at a later time. Of these sixty-
eight, one was for an over-payment and refund and one was for unsecured property. This left our
sample size at sixty-six.

The sixty-six APNs reviewed by the Grand Jury were accompanied by a broad range of
supporting documentation. During interviews, the Grand Jury was told that for every tax penalty
cancellation granted¸ the Waiver Form and the supporting documentation were filed with the tax
payment record.
   ● Ten cancellations were given to taxpayers because they submitted checks for the
     incorrect amounts and were handled by office staff, thus Section 4985.2(a)[2] does not
     apply.
   ● Twelve were cancelled due to taxpayer illness thus potentially qualifying for Section
     4985.2(a).[2] One had no documentation and one other had no Waiver Form.
   ● Twelve were due to banking difficulties such as insufficient funds in checking account.
     All included documentation, but four were without Waiver Forms and Section
     4985.2(a)[2] may potentially apply.
   ● Fourteen were cancelled due to claims of postal service errors, one without
     documentation and two without Waiver Forms.
   ● Nine were due to confusion, for example, first time homebuyers and supplemental tax
     misunderstandings. Three were without documentation and five were without Waiver
     Forms.
   ● One was directed by the Auditors-Controller’s Office not the Tax Collector’s Office due
     to a county addressing error, thus Section 4985.2(a)[2] does not apply.
   ● Four were due to unforeseen circumstances including financial difficulties. One was
     without documentation and three were without Waiver Forms.
   ● Four additional cancellations were reported to the Grand Jury in a separate letter from the
     Tax Collector. The Grand Jury was given the APNs without any other documentation.

For each APN, we expected to be given a Waiver Form completed and signed by the Tax
Collector accompanied by supporting documentation, for verification of health issues, mail, bank
                                                  Delinquent Property Tax Penalty Cancellations ∫ 43



and other special circumstances that may apply. As described above, the amount of
documentation varied greatly.

The Grand Jury attempted to tally the cancellations handled solely by the Tax Collector. Of the
sixty-six APNs reviewed, eleven were not considered because they were handled either by office
staff or the Auditor-Controller. The remaining fifty-five APNs appeared to have been directly
acted on by the Tax Collector. Based on the Tax Collector’s policy, we expected each to have
attached waiver forms and documentation. However, ten (18%) had no documentation and
nineteen (34%) were without waiver forms. Without sufficient documentation, it was not
possible to assess the appropriateness of the waivers granted.

The Code[2] provides for a considerable amount of interpretation in tax penalty cancellations. The
Santa Cruz County Tax Collector gives taxpayers the benefit of doubt. The tax penalty
cancellation records given to the Grand Jury cited reasons by taxpayers of illness, death,
confusion, postal issues, banking errors, and financial difficulties.

In other counties, penalty cancellations appear more likely to be denied, based on information
obtained from their websites.[5][6][7][12][13][14] For example, the Shasta County website[7] had the
following statement:
               I placed my payment in the mailbox at the post office on the day my
               payment was due. Why was a late charge assessed?
               Answer: Placing the envelope in the post office box does not guarantee
               that the mail will be processed the same day/evening. State law requires
               that a payment be treated as if it had been received on the date shown by
               the post office cancellation mark on the envelope. Only U.S. Federal
               Government postmarks will be accepted. To avoid penalties, ask to have
               the envelope hand canceled by the post office. Metered mail is not
               accepted as a valid cancellation.

The Grand Jury also asked to view the tax penalty cancellation requests that were denied. The
Grand Jury was informed by the Tax Collector that no records of denied tax penalty cancellation
requests are kept. This makes it impossible to determine if all applicants were treated
consistently and fairly.

A report was requested from County Information Services Department (ISD) of all tax penalty
cancellations granted and recorded in the Tax Collector’s database. This report proved very
useful but it also demonstrated further inconsistencies in the current system. For example, a
custom report[8] the Grand Jury received covered the dates July 1, 2009 through June 30, 2010
that included the time period of the waivers we received from the Tax Collector. The report
listed 675 APNs with cancelled penalties for a total of $177,389.57 including many not
pertaining to Section 4985.2(a).[2] Similar financial totals for other years were not available.
However, thirteen of the parcels included in the records provided by the Tax Collector were
missing from the report prepared by ISD. This demonstrates inaccuracies of the current property
tax system.
44 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



The Santa Cruz County Grand Jury 2008-2009 issued a report on the ISD. The prior report
included the following statement: “The new property tax system, used by the Auditor, Assessor
and Tax Collector, is the third and final phase of the project plan and will be moved into
production by 2011.”[9] We interviewed representatives of ISD to determine the capabilities of
the new system. It was found that the new system can be easily configured to track and report tax
penalty cancellation. To date, no such requests have been made by the Tax Collector’s or
Auditor-Controller’s offices.

The investigation discovered two special internal audit reports from the Auditor-Controller’s
Office concerning tax penalty cancellations, one from 2005 and another from 2009. Besides the
two special internal audits, there are no regular audits of the Tax Collector’s penalty cancellation
process. Each audit contained several recommendations for improvements in the tax cancellation
penalty process, of which only some have been implemented and some have not.

The key recommendation of the 2005 auditor report[10] that has not been implemented is:
                 We recommend Treasurer-Tax Collector management work with
                 programming staff to create a summary report by tax year that lists all fee
                 waivers by type and reason code/source code. Current system
                 reason/source codes could be expanded to allow for easier identification
                 of types of penalty cancellations. This will allow the Treasurer-Tax
                 collector to review the amounts and types of penalty fee waivers at a
                 summary level.

The key recommendations of the 2009 audit report[11] that have not been implemented are:
      1. The Treasurer-Tax Collector should consider preparing a list of specific
         documents that taxpayers should be required to submit before penalties can be
         waived. For example, hospitalization will require an invoice from the hospital or
         insurance company, or a letter from the doctor. Such a list will ensure that
         sufficient documentation is provided and that penalties are consistently waived.
      2. The Treasurer-Tax Collector should consider modifying its current penalty
         waiver request form to those used by other counties, such as Contra Costa and
         Kern. These counties provide the forms to the taxpayers to complete. The form
         can include a list of documents as referenced in recommendation one. This, in
         conjunction with recommendation one, transfers the responsibility for meeting,
         and the scrutiny for allegedly not meeting, RTC 4985.2(a)[2] from the Treasurer-
         Tax Collector to the taxpayer. This form could be made available on the Office's
         website for ease of access by the taxpayer. Samples of these two counties forms
         are attached as Exhibit A and B.
      3. The Treasurer-Tax Collector should regularly, perhaps quarterly, review a report
         of all penalty cancellations. This will ensure that the Treasurer-Tax Collector is
         aware of the total number and dollar value of penalties being cancelled.

Findings
F1.     The Tax Collector’s use of discretion in evaluating the reason to grant tax delinquency
        penalty cancellations appears inconsistent.
                                               Delinquent Property Tax Penalty Cancellations ∫ 45



F2.   The filing system used in the Tax Collector’s Office does not allow tax penalty
      cancellation documents to be easily located.

F3.   No records are retained of denied requests for tax penalty cancellations.

F4.   The Tax Collector’s Office does not appear to be consistently following the audit
      recommendations made by the Auditor-Controller Office.

F5.   The Tax Collector’s Office staff has no written procedure to follow for the processing of
      penalty cancellations.

F6.   Information regarding delinquent tax penalty cancellation processes is not adequately
      publicized within the County.

F7.   The new computer system has the capability to track details regarding tax penalty
      cancellations if requested by the Tax Collector or Auditor-Controller.

Recommendations
To avoid the appearance of inconsistent application of tax penalty cancellations for delinquent
taxpayers, the Grand Jury makes the following recommendations:

R1. The Tax Collector should create a form for taxpayers requesting the cancellation of tax
    penalties that includes the recommendations of the internal audit reports, an explanation of
    the Tax Code,[1][2][3] and the Tax Collector’s response (i.e. granted or denied and reason).

R2. It should be compulsory for taxpayers to complete the new Waiver Form with supporting
    documentation when requesting a tax penalty cancellation.

R3. The Tax Collector should maintain a separate file containing copies of records of all tax
    penalty cancellation applications, with associated documentation, whether denied or
    approved.

R4. The Tax Collector should broadly publicize the delinquent tax penalty cancellation
    process.

R5. The County Auditor-Controller should add a review of tax penalty cancellations to the
    regular audit of the Tax Collector’s Office.

R6. The Tax Collector should publish a semi-annual report documenting the number of
    requests and the dollar value of the cancelled tax penalties. The report should include a
    summary of reasons why tax penalties cancellations were approved and denied.

R7. The Tax Collector and the Auditor-Controller Office should direct ISD to enable the new
    IT system to track tax penalty cancellation transactions, both granted and denied.

R8. The Tax Collector should act in a more transparent manner when applying the State Code.
46 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



Commendations
ISD has kept the antiquated electronic tax filing system operating for many years past its useful
life.

The Tax Collector’s Office handles the County tax systems efficiently in spite of staff
reductions.

Responses Required
                                                                            Respond Within/
    Respondent                Findings            Recommendations
                                                                              Respond By
 County Treasurer-                                                               60 Days
                                F1- F7               R1-R4, R6-R8
  Tax Collector                                                             September 1, 2011
  County Auditor-                                                                60 Days
                                  F4                     R5, R7
    Controller                                                              September 1, 2011
 County Information                                                              60 Days
                                  F7                       R7
  Services Director                                                         September 1, 2011


Sources
   1. Revenue and Taxation Code of the State of California
      http://www.boe.ca.gov/lawguides/property/current/ptlg/rt/revenue-and-taxation-
      code.html
   2. Revenue and Taxation Code of the State of California Section 4985.2
      http://www.boe.ca.gov/lawguides/property/current/ptlg/rt/4985-2.html
   3. Revenue and Taxation Code of the State of California Section 2512
      http://www.boe.ca.gov/lawguides/property/archive/2010/rt/2512.html
   4. Santa Cruz County Tax Collector Information http://www.co.santa-cruz.ca.us/ttc/
   5. Riverside County Treasurer-Tax Collector, “PROPERTY OWNER’S CANCEL
      PENALTY REQUEST,” accessed: May 22, 2011, http://www.treasurer-
      tax.co.riverside.ca.us/pdf/RequestCancelPenalty.pdf
   6. Contra Costa County Tax Collector, “Application for Tax Penalty Relief,” accessed: May
      22, 2011, http://www.co.contra-costa.ca.us/DocumentView.aspx?DID=811
   7. Shasta County Tax Collector Frequently Asked Questions.
      http://www.co.shasta.ca.us/index/tc_index/tc_faq.aspx
   8. 422-01-002 ISD Special Report County of Santa Cruz, “Penalties Waived on Defaulted
      Taxbills,”run 04/26/11.
   9. Santa Cruz County Grand Jury Final Report and Responses 2008-2009 accessed: May 25,
      2011. http://www.co.santa-cruz.ca.us/grandjury/GJ2009_responses/index.html
                                           Delinquent Property Tax Penalty Cancellations ∫ 47



  10. County of Santa Cruz, Auditor-Controller’s Office Interoffice Correspondence, To: Fred
      Keeley, Treasurer-Tax Collector From Gary Knutson, Auditor-Controller August 24,
      2005, Subject: Whistleblower Hotline Report: Treasurer-Tax Collector’s Waiving of
      Penalties.
  11. County of Santa Cruz, Auditor-Controller’s Office Interoffice Correspondence, To:
      Board of Supervisors Members Individually, From Mary Jo Walker, Auditor Controller,
      December 10, 2008, Subject: CONFIDENTIAL - Investigating Whistleblower Allegation
      - Waiving Penalties.
  12. Tulare County Property Tax Services accessed: May 22, 2011,
      http://www.tularecounty.ca.gov/government/property/default.asp
  13. Kern County Treasurer/Tax Collector, “Penalty Waiver Policy,” August 5, 2003,
      accessed: May 22, 2011,
      http://www.kcttc.co.kern.ca.us/index.cfm?fuseaction=kcttcinternet.showPenaltyWaiverP
      olicy
  14. Kern County Treasurer/Tax Collector, “Kern County Application for Tax Relief,”
      January 2007, accessed: May 22, 2011,
      http://www.kcttc.co.kern.ca.us/Forms/penwaiverapp.pdf
  15. Contra Costa County, “Treasurer - Tax Collector Home Page,” accessed: May 22, 2011,
      http://www.co.contra-costa.ca.us/index.aspx?NID=199

Interviews
     Administrators and Personnel:
           County Auditor-Controller’s Office
           County Tax Collector’s Office

Site Visits
     County Tax Collector’s Office
48 ∫ Santa Cruz County Grand Jury Final Report 2010-2011
                                                                                                ∫ 49



                Pajaro Valley Unified School District
                    Insurance Vendor Selection:
                                      Are There Options?


Summary
The Santa Cruz County Grand Jury investigated the Pajaro Valley Unified School District
(PVUSD) processes for vendor selection. The investigation was prompted by public concern and
a newspaper article regarding potential conflicts of interest related to health insurance consulting
and vendor selection. The investigation found PVUSD selection processes to be transparent and
followed state-mandated procedures. However, the current contract for Medical, Dental and
Vision Consulting Services considered only one vendor bid. It appears that PVUSD relies
heavily on that one contractor, Keenan & Associates, to provide insurance services across a wide
range of roles, including consultant, broker, and administrator of insurance pools, each of which
is separately compensated. The Grand Jury recommends process improvements to increase the
choice of competing vendors, provide more thorough contract review, and ensure a more
comprehensive accounting of total costs.

Definitions
   ● AD&D Insurance: Accidental Death & Dismemberment insurance.
   ● BeLiEF JPA: Benefits Liability Excess Fund Joint Powers Authority. A group of self-
     funded public school districts and community colleges, including PVUSD, that have
     joined together for Stop-Loss insurance coverage.
   ● COE: Santa Cruz County Office of Education.
   ● JPA: Joint Powers Authority. JPAs can be formed by public entities that wish to join
     together and leverage their purchasing power. For example, school districts can join with
     each other, under a JPA, to collectively fund or purchase insurance coverage in a specific
     area.
   ● KPPC: Keenan Pharmacy Purchasing Coalition used by PVUSD to provide employee
     prescription benefits.
   ● Nor Cal ReLiEF JPA: Northern California Regional Liability Excess Fund Joint Powers
     Authority. A large group of member school districts, including PVUSD, that have joined
     together for leverage in obtaining property and liability insurance coverage.
   ● PEPM: Per employee per month.
   ● PMPM: Per member per month.
   ● PO: Purchase Order. An accounting document prepared and approved for all purchases.
   ● PVUSD: Pajaro Valley Unified School District.
   ● SACS: Standardized Account Code. The California Department of Education
     implemented a uniform way for school districts to report their revenues and expenditures.
     Since the 2003-2004 school year, all districts use SACS in their financial reporting.
   ● SAFER JPA: Schools Association For Excess Risk JPA. Provides excess property and
     liability insurance. The Nor Cal ReLiEF JPA is a member of the SAFER JPA.
50 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   ● SAWCX II JPA: School Alliance for Workers’ Compensation Excess II. SAWCX II is a
     JPA that provides excess workers’ compensation protection.
   ● Self-Insurance Fund: A dedicated fund used by self-insured employers to pay claims
     directly.
   ● Stop-Loss Insurance: An insurance policy sometimes used by self-insured employers to
     protect themselves against unexpectedly high claims.
   ● Warrant: The standard accounting term for payments.

Background
Questions were raised by an earlier Grand Jury concerning the budget review process, conflicts
of interest regarding vendor selection, and dollar amounts and types of purchases which should
be submitted for PVUSD Board of Trustees approval. These issues were addressed in PVUSD’s
response to the Santa Cruz County 2006-2007 Grand Jury Final Report with Responses.[1]

More recently, there have been persistent, yet unsubstantiated, rumors regarding a potential
conflict of interest with the selection of health insurance vendors. A 2009 newspaper article
reported that a PVUSD trustee was concerned about a perceived conflict of interest with the
PVUSD insurance consultant, who was also an insurance vendor.[2]

Employee benefits are the second largest portion of the overall PVUSD budget after salaries.
According to the Second Interim 2010-11 PVUSD SACS report, expenditures for employee
benefits are $47.2 million of the total $182.7 million Operating Budget for fiscal year 2010-
2011.[3] $26.3 million of these benefits are for Health and Welfare alone.[4] PVUSD medical
costs have tripled over the last 14 years, while dental and vision costs have remained relatively
flat.[5]

Scope
Grand Jury members reviewed PVUSD Board Meeting packets and minutes, PVUSD budgets,
PVUSD purchasing procedures, PVUSD Board bylaws, several PVUSD audit reports, web
content related to insurance vendors that had contracted with PVUSD, and lawsuit documents
filed in Alameda County (Alameda County Superior Court Case No. RG04183334). This is a
class action lawsuit against one of the PVUSD vendors, Keenan & Associates, that alleges
various improper business practices relating to the brokerage of insurance for public schools and
community colleges. The Grand Jury conducted interviews with employees of the County Office
of Education (COE), PVUSD Administration, and the PVUSD Board of Trustees. PVUSD
purchase order (PO) history and warrants (payments) were reviewed. This work was performed
to determine if there were any apparent improprieties or conflicts of interest regarding insurance
vendor selection.

Investigation
The investigation initially focused on whether a conflict of interest existed within PVUSD,
regarding the choice of health insurance vendors. The scope of the investigation was
subsequently expanded to examine the dominance of one vendor, playing a role across almost all
PVUSD insurance needs, in more detail. The reliance on a single vendor also triggered a closer
examination of the PVUSD bid process and level of contract review.
                             Pajaro Valley Unified School District Insurance Vendor Selection ∫ 51



In initial interviews at the COE, it was learned that districts within the county select their own
vendors, subject to the State of California Public Contract Code Section 20111(a), which
requires school district governing boards to competitively bid for services that exceed $50,000
(adjusted annually for inflation).[6] The COE does not control contracts awarded by individual
districts; however, a financial audit by an independent firm of Certified Public Accountants is
required annually.[7] During these audits, the accountants may request documentation on selected
contracts.

PVUSD Board meeting minutes,[8] Board packets[9] and related newspaper articles were
reviewed for any mention of contracts regarding health insurance. At the August 26, 2009, Board
meeting, a contract for Keenan & Associates to provide Medical, Dental and Vision Consulting
Services was submitted for approval. The Board packet documented that requests had been sent
to five prospective vendors. Keenan & Associates was the only vendor to send a proposal prior
to the submittal deadline. Another proposal was received after the deadline and was returned
unopened.[12] A Santa Cruz Sentinel article reported that the contract was discussed at the Board
meeting, but it was tabled at the request of one of the trustees who was concerned that in acting
as both as a District consultant and insurance vendor, Keenan & Associates had a conflict of
interest.[2] The official Board meeting minutes document that the contract approval was deferred,
to clarify concerns of potential conflict of interest.[13]

Keenan & Associates made a presentation to the Board, clarifying the services they provide to
schools, on October 14, 2009.[14] The contract with Keenan & Associates was eventually
approved at the Board meeting on October 28, 2009. The cover page in the Board packet
clarified that the consultant, Keenan & Associates, would be acting exclusively in an advisory
and consultative capacity.[15] [16]

Upon further review by the Grand Jury, the agreement with Keenan & Associates revealed
several clauses which clearly authorize Keenan & Associates to provide brokerage services in
addition to consulting services. In Section 2 of the agreement, the Brokerage Services option has
been accepted. In Section 3, it states that Keenan shall procure and maintain Workers’
Compensation and General Liability coverage. In Exhibit B of the agreement, Keenan &
Associates has exclusive authority and right to negotiate with insurance carriers covering
Prescriptions, Short and Long Term Disability, Life and AD&D (Accidental Death &
Dismemberment). In Exhibit C, it states Keenan shall receive commissions from the insurance
carriers and/or other vendors for the placement of insurance coverage.[16]

At this point the investigation was expanded to look at the services provided by Keenan &
Associates. This company focuses on providing insurance, employee benefits, and financial
services for California schools and community colleges.[17] Their insurance services include
consulting, brokering, and managing numerous JPA's (Joint Powers Authorities). Public entities
join JPA's like SAWCX II (Schools Alliance for Workers' Compensation Excess) JPA[18] or Nor
Cal ReLiEF (Northern California Regional Liability Excess Fund) JPA,[19] to collectively
purchase insurance and other products as a large pool. Keenan & Associates forms and manages
these JPA's and provides the brokerage services. They also have a division, Keenan Financial
Services, that provides retirement financial solutions for school employees, such as SERP
(Supplemental Early Retirement Program) and Futuris (trust fund for post-employment
benefits).[20]
52 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



The Grand Jury did Internet research on Keenan & Associates, and discovered some material on
blogs[21] [22] and the Alameda County website for the Superior Court of California.[23]

While the blog content could be biased, it did lead the Grand Jury to the court documents for
case No. RG04183334 on the Alameda County website. On November 2, 2004, the County of
Santa Clara filed a complaint against several insurance brokers, including Keenan &
Associates.[24] The complaint has been amended a number of times over the years. The fourth
version of the complaint was filed on July 12, 2006. At that time, it was a class action lawsuit,
with a list of plaintiffs including San Francisco Community College District, San Francisco
Unified School District, Tuolumne Joint Powers Authority, and the People of the State Of
California, by and through San Francisco City Attorney Dennis Herrera. Keenan & Associates
was the only remaining defendant left in the complaint by that time.[25]

The fourth version of the amended complaint alleges Keenan has “represented itself as a
sophisticated and trustworthy insurance business expert,” but has engaged in “secret fee
agreements,” “undisclosed kickbacks,” “bid-rigging,” “improper steering,” and “anti-competitive
practices.”[25] Overall, the complaint alleges that Keenan & Associates abuses its position of
trust, as an advisor to public entity clients and JPA's, to maximize the undisclosed compensation
they receive as a broker from carriers and vendors to whom they steer insurance business. The
allegations conclude that the carrier and vendor recommendations made by Keenan & Associates
may not be in the best interest of their public entity clients. The alleged undisclosed broker
compensation received from carriers and vendors prevents clients from verifying whether they
are getting the best deal or understanding the impact to their premiums. It should be noted that
everything in the Fourth Amended Complaint must be treated as unproven allegations only.

On August 24, 2010, one of the plaintiffs, the San Francisco City Attorney, settled out of court
and is no longer part of the case, which is now in its seventh year. At the time of this report there
are 779 documents filed under the Register of Actions in the case, and it has not yet gone to trial.

This lawsuit was discussed in a front page article in the September 22, 2005, issue of The
Recorder, a provider of California legal content. The article stated “Santa Clara County is suing
several top insurance brokerage firms, claiming they have duped customers out of millions
through secret ‘kickbacks’ and other ‘lucrative’ service deals and are ‘steering’ clients towards
insurers that are offering brokers undisclosed commissions, funded through insurance
premiums.”[26]

A letter posted on the Internet from the Capistrano Unified Education Association (a teachers’
Union) dated May 19, 2009, asked the Capistrano Unified School District Board of Trustees to
rescind their selection of Keenan & Associates, citing issues surrounding the previously
mentioned lawsuit, the need to use objective criteria to evaluate service proposals, and the
appearance of impropriety.[27]

The next step in the investigation was to request vendor-related financial documents from
PVUSD. They responded promptly, by directing us to their website where this information was
located. The website contains detailed budget information,[28] bidding policies,[29] [30] and conflict
of interest policy. [31] In response to the Grand Jury request for vendor information, PVUSD
created new public web pages with purchase order[32] and vendor payment (warrant) histories.[33]
                              Pajaro Valley Unified School District Insurance Vendor Selection ∫ 53



The Grand Jury also reviewed PVUSD audit reports. The Grand Jury observed that the three
JPA's noted in the audit reports were also JPA’s mentioned in the lawsuit, as examples where
Keenan & Associates allegedly engaged in deceptive business practices.[25] These independent
audits were performed by Vavrinek, Trine, Day & Co., LLP, Certified Public Accountants, in
Palo Alto.

       Table 1. Participation in Keenan managed JPA's noted in PVUSD audits.

                       2006            2007           2008           2009           2010
                      Audit[34]       Audit[35]      Audit[36]      Audit[37]      Audit[38]

     SAFER JPA            X               X              X              X              X

    SAWCX JPA                                            X              X              X

     BeLiEF JPA                                          X              X              X



The SAFER (Schools Association For Excess Risk) JPA provides excess property and liability
insurance coverage, and provides an umbrella that includes the Nor Cal ReLiEF JPA mentioned
previously.[39] The SAWCX II (School Alliance for Workers’ Compensation Excess II) JPA
provides excess workers’ compensation insurance. The BeLiEF (Benefits Liability Excess Fund)
JPA is used for excess medical insurance.[38]

After reviewing information requested from PVUSD, the Grand Jury scheduled interviews with
PVUSD administrators and learned that PVUSD does not purchase health insurance from
insurance vendors, or via brokers like Keenan & Associates. Instead, their health and workers’
compensation benefits are paid from a self-insurance fund up to a certain level. An actuarial
analysis determines the size of the annual contributions needed to maintain the fund to pay
claims.[40]
54 ∫ Santa Cruz County Grand Jury Final Report 2010-2011




       Figure 1. Illustration of PVUSD Self-Insurance Fund.

For the current fiscal year (2010-2011), according to the Second Interim SACS Report, PVUSD
estimates it will add $38.7 million to the fund. The beginning balance is $4.5 million (which has
an audit adjustment applied). The ending balance is $4.0 million. The estimated expenditures
from this fund are $39.2 million for medical, vision, dental, and workers’ compensation claims
(includes administration and a transfer out amount of $0.55 million).[41] An earlier report, when
the budget was adopted, details the breakdown of expenditures. At $32.7 million, medical is the
largest portion.[42]

PVUSD pays large claims, above $285,000, with stop-loss excess insurance through the BeLiEF
(Benefits Liability Excess Fund) JPA. Members in this JPA include other self-funded public
school districts and community colleges. Keenan & Associates created and manages the BeLiEF
JPA.[43] The cost for this stop-loss protection is currently $1.7 million per year.[44]

A copy of the latest Keenan & Associates Stewardship Report[43] clearly indicates that the overall
relationship with Keenan & Associates goes beyond acting “exclusively in an advisory and
consultative capacity between vendors such as Coastal Healthcare and Blue Cross” as stated in
Board Agenda Backup Item 12.3, dated October 28, 2009.[16]

Purchase orders reports, available from PVUSD website, were reviewed, to better understand the
extent of the business relationship with Keenan & Associates. In addition to the purchase order
for the Medical, Dental and Vision Consulting Services contract, purchase orders were also
noted if they:
   ● Were made out directly to Keenan & Associates for other services.
                            Pajaro Valley Unified School District Insurance Vendor Selection ∫ 55



   ● Were made out to other vendors and Keenan & Associates received indirect
     compensation.
   ● Were made out to other vendors that were related in some way to Keenan & Associates.

Table 2 shows selected purchase orders and amounts to be paid to Keenan and Associates for
insurance and workers’ compensation services.

       Table 2. Selected purchase orders directly to Keenan & Associates in the
       08/11/2010 Board Meeting Purchase Order Report.[44]

      Purchase Order            Vendor             Amount                Description

           110755             Keenan &             $49,000           Insurance Consultant
                              Associates                                   services

           110756             Keenan &           $1,720,000        Stop-Loss protection plan
                              Associates                              2010 (BeLiEF JPA)

           110636             Keenan &             $41,000         Life insurance premiums
                              Associates                                     10-11

           110754             Keenan &            $195,000            Keenan Workers
                              Associates                           Compensation 2010-2011



As stated in the Keenan Stewardship Report,[43] Keenan receives:
   ● A consulting fee of $1.76 PEPM for Medical, Dental and Vision.
   ● A JPA Management Fee of 3% premium for the BeLiEF JPA stop-loss protection. If
     there is any indirect broker compensation (as alleged in the lawsuit) it was not disclosed
     in the Stewardship report.
   ● A commission of 14% for the placement of term life and AD&D insurance and ongoing
     service responsibilities, via MetLife.

Table 3 shows purchase orders for services paid to other vendors for which it is known Keenan
receives other compensation.
56 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



       Table 3. Selected purchase orders to other vendors, for which it is known Keenan
       receives other compensation, in the August 11, 2010, Board Meeting Purchase
       Order Report.[44]

        Purchase Order          Vendor           Amount                Description

            110757              KPPC[45]         $55,000       KPPC Agency Coalition
                                                                     Billing

            110760            Chiropractic      $242,000      Chiropractic Health Plan of
                              Health Plan                                 CA

            110753               UNUM           $660,000      Short/Long Term Disability
                                Provident                             Coverage



As stated in the Keenan Stewardship Report,[43] Keenan receives:
   ● Coalition Management Fee of $0.80 PMPM for KPPC.
   ● Commission of $0.50 PEPM for the “Chiropractic Carve Out program.”
   ● Commission of 10% for the placement of long and short term disability insurance from
     Unum.

Table 4 includes purchase orders for other related Keenan & Associates products and services.

       Table 4. Selected purchase orders to JPA's and other products related to Keenan
       & Associates in the August 11, 2010, Board Meeting Purchase Order Report.[44]

        Purchase Order          Vendor          Amount                 Description

            110906           SAWCX II[18]       $151,154           SAWCX II Member
                                                                     Contribution

            110509              Nor Cal         $726,523           Insurance Coverage
                               ReLiEF[19]

            Various            United of       $2,894,069          SERP[46] Installments
                                Omaha           (subtotal)



The Grand Jury was not able to determine what, if any, indirect compensation Keenan &
Associates receives for the items in the table above. Keenan & Associates manages the SAWCX
II and Nor Cal ReLiEF JPA’s, and SERP is a Keenan product. There were no disclosures for
these items in the Keenan Stewardship report. The lawsuit alleged that Keenan & Associates
                              Pajaro Valley Unified School District Insurance Vendor Selection ∫ 57



obtains insurance for JPA’s such as SAWCX II and Nor Cal ReLiEF but does not disclose
indirect compensation received from insurance carriers.

Keenan & Associates has had a contractual relationship with PVUSD since November 2003. The
Grand Jury explored the bidding process behind the last Medical, Dental and Vision Consulting
Services contract with Keenan & Associates. According to PVUSD, there are only a handful of
vendors in California that are qualified to provide the kind of insurance consulting services they
require. Bid requests were sent to five prospective vendors. There was a period of two weeks for
vendors to respond. The only bid received prior to the stipulated deadline was from Keenan &
Associates, with a second bid returned unopened because it arrived thirty (30) minutes late.

PVUSD is in compliance with all bidding regulations and policies. State law and PVUSD
policies stipulate minimum requirements for the bidding process for services. As mentioned
previously in this report, Public Contract Code 20111(a) specifies a bid threshold, above which
competitive bids shall be sought through advertisement. This threshold is revised every year and
communicated by the State Superintendent of Public Instruction. In 2009, this threshold had
increased to $76,700.[47] PVUSD Board Policy section AR 3311(a) describes the method for
obtaining services, and section AR 3311(b) stipulates bids must be advertised for a minimum of
two weeks.[21]

Near the end of the investigation, additional interviews were held with PVUSD trustees, one of
whom pointed out that clause 4-D in the Medical, Dental and Vision Consulting Services
contract with Keenan & Associates offers some protection to PVUSD against conflict of interest.
This clause states:
               Keenan shall comply with all applicable state and/or federal laws and
               regulations regarding disclosure of compensation. We embrace industry
               efforts for transparency and believe that it is important that clients have
               access to information that may be relevant to their choice of insurance
               products, including cost of such insurance and services, and, the
               compensation that may be directly or indirectly paid to Keenan in
               connection with the products or services that are selected. If you have any
               questions regarding any of these items or desire additional information,
               you may contact your Keenan account representative to discuss this
               matter in more detail.[16]

Trustees appear to have relied heavily on information and recommendations provided by the
administration when reviewing the contract. The PVUSD trustees and administrators interviewed
were not aware of the class action lawsuit brought against Keenan & Associates. As of the
writing of this report, these allegations have not been resolved and the case has not yet gone to
trial.

Keenan & Associates appears to be a professionally-run company with a solid understanding of
the insurance market. They also appear to provide a comprehensive set of solutions to satisfy
their customers’ needs.

The Grand Jury made contact with an executive from Keenan & Associates at the end of the
investigation. The executive stated that Keenan & Associates’ objective is to assist their clients
58 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



to find the best insurance products and services at the best price. The executive also added that
any commissions they receive when acting as a broker are consistent with industry practices.

Findings
F1.   The Grand Jury found no evidence of any conflict of interest between PVUSD insurance
      related vendors and PVUSD employees or trustees.

F2.   It appears that the PVUSD Board of Trustees has relied heavily on the administration for
      information and recommendations on vendor selection and contract approval.

F3.   During the initial interviews, PVUSD Board of Trustees and administrators appeared to be
      unaware of ongoing litigation concerning Keenan & Associates.

F4.   The services that Keenan & Associates provide PVUSD go beyond an advisory and
      consultative capacity for health benefits to also include brokering a wide variety of
      insurance, prescription management, early retirement planning and administration of
      several JPA’s.

F5.   Even though PVUSD requested proposals from five qualified vendors for Medical, Dental
      and Vision Consulting Services, and followed California Code and district purchasing
      policies, the process does not appear to encourage multiple bids.

F6.   The Medical, Dental and Vision Consulting Services contract discloses that Keenan &
      Associates receives direct compensation from PVUSD and indirect compensation from
      brokered vendors, which is a conflict in that it diminishes the incentive for Keenan &
      Associates to always recommend vendors offering PVUSD the best deals.

Recommendations
R1. PVUSD Board of Trustees should act more independently of the administration when
    reviewing and approving significant contracts and vendors.

R2. PVUSD should include in their purchasing process an Internet background check on
    prospective vendors, relating to litigation or other issues.

R3. PVUSD should review their purchasing process and identify possible changes that would
    increase the number of qualified bids.

R4. PVUSD should consider the nature of the issues raised in the Fourth Amended Class
    Action Complaint to determine if they apply to their district. Following that, they should
    exercise clause 4-D in the Medical, Dental and Vision Consulting Services contract, to
    review both total direct and indirect compensation received by Keenan & Associates and
    the potential impact to PVUSD’s overall costs.
                             Pajaro Valley Unified School District Insurance Vendor Selection ∫ 59



Commendations
The Grand Jury requested budget information, purchasing policies and spending records from
PVUSD. They responded with links to existing information on their website and added new
detailed purchase order and payment history content at:
             http://www.pvusd.net/info/public-notice/PurchaseOrdersReport.html
             http://www.pvusd.net/info/public-notice/WarrantReports.html
This PVUSD website contains a large amount of detailed information and historical data. It is an
excellent example of transparency for which they should be commended.

Responses Required
                                                                      Respond Within/
    Respondent             Findings         Recommendations
                                                                        Respond By

      PVUSD                                                                60 Days
                            F3-F6                  R2-R4
   Superintendent                                                     September 1, 2011

 PVUSD Board of             F2-F3                    R1                   90 Days
    Trustees                                                           October 1, 2011



Sources
   1. Santa Cruz 2006-2007 Grand Jury, “Report Card - Pajaro Valley Unified School
      District,” June 2007, accessed: April 7, 2011, http://www.co.santa-
      cruz.ca.us/grandjury/GJ2007_responses/5-3%20PVUSD.htm
   2. Jones, ”PVUSD faces money trouble, labor unrest,” Santa Cruz Sentinel, August 27,
      2009, accessed: April 7, 2011, http://www.santacruzsentinel.com/ci_13213116
   3. PVUSD, “2010-11 Second Interim SACS Report, Form 01I, General Fund, Summary -
      Unrestricted/Restricted, Revenues, Expenditures, and Changes in Fund Balance,” p1 &
      p6,” March 5, 2011, PDF page 17, accessed: April 5, 2011,
      http://www.pvusd.net/info/public-notice/documents/SACS10-112ndInterim.pdf
   4. PVUSD, “2010-11 Second Interim SACS Report, Form 01I, General Fund, Summary -
      Unrestricted/Restricted, Revenues, Expenditures, and Changes in Fund Balance,” p1 &
      p6,” March 5, 2011, PDF page 22, accessed: April 5, 2011,
      http://www.pvusd.net/info/public-notice/documents/SACS10-112ndInterim.pdf
   5. McFadden, “Multi-year Fiscal Outlook: Challenges facing PVUSD,” Presentation to the
      PVUSD Board of Trustees on February 9, 2011, slide 12, accessed: April 6, 2011,
      http://www.pvusd.net/info/public-notice/documents/Board-
      Fededjobsactionandoverview.pdf
   6. State of California Legislative Council, “PUBLIC CONTRACT CODE SECTION
      20110-20118.4”, Code 20110(a), accessed: April 7, 2011, http://www.leginfo.ca.gov/cgi-
      bin/displaycode?section=pcc&group=20001-21000&file=20110-20118.4
60 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   7. PVUSD, “Board of Trustees Meeting Packet for January 27, 2010,” item 13.2, PDF page
       159, accessed: April 7, 2011,
       http://www.pvusd.net/board/agendas/documents/Jan2710.pdf
   8. PVUSD, “Board of Trustees Meeting Minutes,” accessed: April 7, 2011,
       http://www.pvusd.net/board/minutes/
   9. PVUSD, “Board of Trustees Meeting Agendas and Packets,” accessed: April 7, 2011,
       http://www.pvusd.net/board/agendas/
   10. PVUSD, “Board of Trustees Meeting Minutes for August 12, 2009,” section 9.3, PDF
       page 4, accessed: April 7, 2011,
       http://pvusd.net/board/minutes/documents/BdJAug1209Minutes.pdf
   11. PVUSD, “Board of Trustees Meeting Packet for August 12, 2009,” item 9.3, PDF pages
       18, 21, accessed: April 7, 2011,
       http://www.pvusd.net/board/agendas/documents/Aug1209.pdf
   12. PVUSD, “Board of Trustees Meeting Packet for August 26, 2009,” Item 9.3, PDF pages
       16-28, accessed: April 7, 2011,
       http://www.pvusd.net/board/agendas/documents/Aug2609.pdf
   13. PVUSD, “Board of Trustees Meeting Minutes for August 26, 2009,” sections 8-10, PDF
       pages 4-5, accessed: April 7, 2011,
       http://www.pvusd.net/board/minutes/documents/BdJAug2609Minutes.pdf
   14. PVUSD, “Board of Trustees Meeting Minutes for October 14, 2009,” section 13.1, PDF
       pages 7-8, accessed: April 7, 2011,
       http://www.pvusd.net/board/minutes/documents/BdOct1409Minutes.pdf
   15. PVUSD, “Board of Trustees Meeting Minutes for October 28, 2009,” section 12;3, PDF
       page 6, accessed: April 7, 2011,
       http://www.pvusd.net/board/minutes/documents/BdOct2809Minutes.pdf
   16. PVUSD, “Board of Trustees Meeting Packet for October 28, 2009,” item 12.3, PDF
       pages 18-31, accessed: April 26, 2011,
       http://www.pvusd.net/board/agendas/documents/Oct2809.pdf
   17. Keenan & Associates, “Website - About page,” accessed: April 26, 2011,
       http://www.keenan.com/schools/about.asp
   18. Keenan & Associates, “Website - SAWCX II Excess WC Coverage,” accessed: April 26,
       2011, http://www.keenan.com/schools/solutions-ewcc.asp
   19. 19. Northern California ReLiEF, “2008-2009 Annual Report,” accessed: April 26, 2011,
       http://www.norcalrelief.org/
   20. Keenan & Associates, “Website - Keenan Financial Services,” accessed: April 26, 2011,
       http://www.keenan.com/schools/solutions-kfs.asp
   21. Larkins, “Did San Francisco Schools and their fellow plaintiffs want to clean up the
       school insurance industry?,” San Diego Education Report Blog, accessed: April 17, 2011,
       http://mauralarkins.com/insurancebrokerlawsuitSF.html
   22. Larkins, “JPA's, insurance brokers, lawyers: who is profiting from school litigation?
       Santa Clara v. Keenan & Associates,” San Diego Education Report Blog, December 18,
       2008, accessed: April 17, 2011, http://learningboosters.blogspot.com/2008/12/jpas-
       insurance-brokers-lawyers-who-is.html
                         Pajaro Valley Unified School District Insurance Vendor Selection ∫ 61



23. Superior Court of the State of California, County of Alameda, “Welcome to DomainWeb,
    the Court’s Public Access Website!,” accessed: April 5, 2011,
    http://apps.alameda.courts.ca.gov/domainweb/
24. Santa Clara County v. Driver Alliant Insurance Services, Inc., “Case RG04183334,
    Original Complaint”, Superior Court of the State of California, County of Alameda, filed
    November 2, 2004, accessed: April 5, 2011,
    http://apps.alameda.courts.ca.gov/domainweb/service?ServiceName=DomainWebService
    &PageName=itree&Action=16158253 or
    http://apps.alameda.courts.ca.gov/domainweb/service?ServiceName=Domain
    WebService&TemplateName=jsp/imgviewer.html&rofadt=11/02/04&Action=16158253
25. San Francisco Community College v. Keenan & Associates, “Case RG04183334, Fourth
    Amended Class Action Complaint,” Superior Court of the State of California, County of
    Alameda, filed July 12, 2006, accessed: April 18, 2011,
    http://apps.alameda.courts.ca.gov/domainweb/service?ServiceName=DomainWebService
    &PageName=itree&Action=18569632 or
    http://apps.alameda.courts.ca.gov/domainweb/service?ServiceName=DomainWebService
    &TemplateName=jsp/imgviewer.html&rofadt=07/12/06&Action=18569632
26. O’Shea, “Santa Clara takes cue from Spitzer,” The Recorder, September 22, 2005,
    accessed: April 7, 2011, http://www.law.com/jsp/ca/PubArticleCA.jsp?id=900005437369
27. Soderberg, Capistrano Unified Education Association letter to Capistrano Unified School
    District Board of Trustees, May 19, 2009, accessed: April 7, 2011,
    http://www.mauralarkins.com/files/re_KeenanCUSDLetter.pdf
28. PVUSD, “Financial/Budget Documents web page,” accessed April 7, 2011,
    http://www.pvusd.net/info/public-notice/index.html
29. PVUSD, “Board Policies - Series 3000 - Business & Noninstructional Operations,”
    adopted May 7, 2008, section AR 3311 on Bids, PDF page 28-35, accessed: April 7,
    2011,
    http://www.pvusd.net/board/policies/documents/3000PajaroValleyUSDBUSINESSNONI
    NSTRUCTIONALOPERATIONS.pdf
30. PVUSD, “Purchasing Services Handbook”, revised July 2010, sections 1.3 and 1.8, PDF
    pages 6 and 8, accessed: April 7, 2011,
    http://www.pvusd.net/departments/Business_Services/Purchasing/staff-
    info/documents/PVUSD_Purchasing_Handbook_WebVersion5.pdf
31. PVUSD, “Board Policies - Series 9000 - Bylaws of the Board,” adopted July 26, 2006,
    section 9270 on Conflict of Interest, PDF page 46, accessed: April 7, 2011,
    http://www.pvusd.net/board/policies/documents/9000PajaroValleyUSDADOPTED.pdf
32. PVUSD, “Board Reports - Purchase Orders,” web page, since FY 2009-2010, accessed:
    April 7, 2011, http://www.pvusd.net/info/public-notice/PurchaseOrdersReport.html
33. PVUSD, “Board Reports - Warrants,” web page, since FY 2009/2010, accessed: April 7,
    2011, http://www.pvusd.net/info/public-notice/WarrantReports.html
34. Vavrinek et al., “PVUSD Audit Report - Fiscal Year 05-06,” note 16, PDF page 56,
    accessed: April 7, 2011, http://www.pvusd.net/info/public-
    notice/documents/PAJAROVALLEY2006.pdf
62 ∫ Santa Cruz County Grand Jury Final Report 2010-2011



   35. Vavrinek et al., “PVUSD Audit Report - Fiscal Year 06-07,” note 15, PDF page 54,
       accessed: April 7, 2011, http://www.pvusd.net/info/public-
       notice/documents/PajaroValleyUnifiedSD2007.pdf
   36. Vavrinek et al., “PVUSD Audit Report - Fiscal Year 07-08,” note 15, PDF page 59,
       accessed: April 7, 2011, http://www.pvusd.net/info/public-
       notice/documents/PAJAROVALLEYUSD2008.pdf
   37. Vavrinek et al., “PVUSD Audit Report - Fiscal Year 08-09,” note 14, PDF page 58,
       accessed April 7, 2011, http://www.pvusd.net/info/public-
       notice/documents/PajaroValleyUnifiedSD-2009.pdf
   38. Vavrinek et al., “PVUSD Audit Report - Fiscal Year 09-10,” note 14, PDF page 55,
       accessed: April 7, 2011, http://www.pvusd.net/info/public-
       notice/documents/PajaroValleyUSD09-10AuditReport.pdf
   39. SAFER, “School Association For Excess Risk JPA”, accessed: April 7, 2011,
       http://www.saferjpa.org/
   40. PVUSD, “Board of Trustees Meeting Packet for December 9, 2009,” Item 14.2, PDF
       page 40-65, accessed: April 24, 2011,
       http://www.pvusd.net/board/agendas/documents/Dec909.pdf
   41. PVUSD, “2010-11 Second Interim SACS Report, Form MYPIO:67, Fund 67: Self-
       Insurance Fund - Multiyear Projections - Unrestricted/Restricted, p1,” printed March 5,
       2011, PDF page 120, accessed: April 5, 2011, http://www.pvusd.net/info/public-
       notice/documents/SACS10-112ndInterim.pdf
   42. PVUSD, “2009-2010 vs. 2010-2011 Miscellaneous Funds by Object,” June 16, 2010,
       PDF page 23, accessed: April 30, 2011, http://pvusd.net/info/public-
       notice/documents/10-PVUSD2010-2011ProposedBudgetAdoption-2009-2010vs2010-
       2011MiscellaneousFundsbyObject.pdf
   43. Keenan & Associates, “Stewardship Report 2009/2010 for Pajaro Valley Unified School
       District,” September 23, 2010
   44. PVUSD, “Board Purchase Order Report for 8/11/2010 Board Meeting,” accessed: April
       22, 2011, http://www.pvusd.net/info/public-
       notice/documents/BoardPOReport08112010.pdf
   45. Keenan & Associates, “Keenan Pharmacy Purchasing Coalition,” accessed: April 26,
       2011, http://www.keenan.com/schools/solutions-kppc.asp
   46. Keenan & Associates, “Keenan Financial Services: SERP,” accessed: April 26, 2011,
       http://www.keenan.com/schools/solutions-kfs_serp.asp
   47. O’Connell, “ANNUAL ADJUSTMENT TO BID THRESHOLD FOR CONTRACTS,”
       Letter from California Department of Education, accessed: April 7, 2011,
       http://www.cde.ca.gov/fg/ac/co/bidthreshold2010.asp

Site Visits
       County Office of Education, Santa Cruz
       Pajaro Valley Unified School District Office, Watsonville
                                                                                               ∫ 63



           Santa Cruz County Correctional Facilities:
               Are They Effectively Utilized and What Are the Options?


Summary
Santa Cruz County Correctional facilities are currently facing many challenges, including
continued reduction in funding for staff, facilities and programs as well as the looming return of
inmates from state prisons. Educational programs have been shown to reduce recidivism;
however, there are no performance assessment tools in place to determine if the current
programming is effective. In addition, the lack of measurements hampers the ability to prioritize
programs and utilize declining funds in the most beneficial manner. These issues led the Grand
Jury to investigate whether options and strategies exist to improve efficiency that may help
improve program effectiveness, development of an efficient jail population distribution and
provide adequate services to incarcerated individuals.

Definitions
   ● Capacity: The number of inmates each detention facility was designed to hold (rated
     capacity) or the number of inmates that can safely be housed in the facility (maximum
     capacity).
   ● Friends Outside: A national non-profit organization providing services to incarcerated
     individuals.
   ● Gemma: A program provided by the Community Action Board of Santa Cruz County,
     Inc., dedicated to preparing women in jail for their reentry into society and to reunite with
     their families. The program provides diverse life skills classes to help prevent the women
     from falling into the recidivism cycle.
   ● Infirmary: A healthcare unit set up and operated for the purpose of caring for inmates
     who need skilled nursing care but not in need of hospitalization or placement in a
     licensed nursing facility and whose care cannot be managed safely in an outpatient
     setting.
   ● LVN: An LVN is a Licensed Vocational Nurse licensed by the state to provide routine
     patient care. An LVN must be supervised by either an Registered Nurse or physician. The
     LVN is unable to provide medical assessments.
   ● Medium Security: A locked facility in a dorm-like setting, rather than individual cells,
     for inmates that do not pose a high security risk.
   ● Minimum Security: An unlocked facility for inmates who pose very little security risk.
   ● “O” unit: The observation unit that includes rooms within the medical unit where
     physically and mentally ill inmates are monitored by video and medical staff.
   ● Recidivism: Habitual or chronic relapse especially into criminal or anti-social behavior.
   ● Registered Nurse (RN): RNs are nurses that have been licensed by the State of
     California Board of Registered Nursing. RNs go to college for two to four years and must
     pass the National Council Licensure Examination in order to obtain licensure in
     California. They typically independently provide a wide range of complex health care in
     many types of settings.
64 ∫ Santa Cruz County Grand Jury Final Report 2009-2010



   ● Sally Port: A secure, controlled entryway, as at a fortification or a prison. The entrance
     is usually protected in some way, such as with a fixed wall blocking the door which must
     be circumvented before entering, but which prevents direct enemy fire from a distance.
   ● Sheriff’s Treatment Program: This is a program established in Santa Barbara County
     that is designed to help inmates who are serving time to eliminate their alcohol and drug
     use, establish a foundation in recovery and reduce their involvement with law
     enforcement. The program accommodates inmates at different levels of sentencing.
   ● Title 15: Regulations adopted by the State of California that set minimum jail standards
     for operation and administration of detention facilities covering classification of inmates,
     safety issues, educational programs, disciplinary guidelines and medical services.
   ● Title 24: Regulations adopted by the State of California that set minimum standards for
     the physical plant, furnishings and equipment for local correctional facilities.
   ● Warrant Reduction Project (WRAP): WRAP is a program developed by the Santa
     Cruz County Probation Department in conjunction with Friends Outside to reduce the
     number of released prisoners who may re-offend due to probation violations. The
     individuals with Friends Outside are also able to provide resources for peer and group
     support as well as aftercare management.

Background
The correctional system in Santa Cruz County consists of four facilities: The Main Jail on Water
Street, Rountree Medium and Rountree Minimum (which is currently only being utilized for day
programs) in Watsonville, and Blaine Street behind the Main Jail which is a minimum security
facility for women only. Over the years, there have been ongoing overcrowding issues in the
Main Jail.[1] The Grand Jury decided to investigate how the Rountree Facility could be better
utilized to assist in overcrowding as well as reintroducing medical services at the facility. In
addition, we began to look at the educational programs that were offered at all of the facilities.
How effective were they and, more importantly, did they help with the reduction in recidivism?
Another area that came to our attention was Blaine Street and how it appears to be under utilized.
The potential for increased jail populations exists due to the state’s decision to send prisoners
who have less than three-year sentences back to local facilities. The Grand Jury determined it is
timely to explore options for improving program effectiveness, development of an efficient jail
population distribution and provide adequate services to incarcerated individuals.

Scope
Under California Penal Code Section 919 (b),[2] the Grand Jury is charged with inspecting the
correctional facilities for the county on an annual basis to ensure they are in compliance with the
California Correctional Authority and Standards contained in Title 15 and Title 24 of the
California Code of Regulations. After conducting our inspections, we decided to investigate
further potential strategies the correctional system could employ in their efforts to manage the
County’s jail population. The investigation concentrated on three main areas: jail population
distribution, medical/dental services and the inmate program assessment/tracking process.
                                                      Santa Cruz County Correctional Facilities ∫ 65



We used the following methods to gather our data:
   ●   Jail Inspections
   ●   Interviews with correctional staff
   ●   Interviews with medical staff
   ●   Interviews with inmates
   ●   Interviews with program providers
   ●   Researching programs/practices of other counties throughout California
   ●   Distribution of jail populations

Investigation
The Grand Jury’s intent was to provide a constructive report that could assist the County in
addressing some of the chronic issues with its various correctional facilities.

A. Jail Population
We observed overcrowded conditions in the Main Jail and under-utilization of the capacity at
both Blaine Street and Rountree Minimum Facility.

The Main Jail has a rated capacity of 311 inmates; however, the average number of inmates per
month in 2009 was 336 and by 2010 it had increased to 350.[1] The Rountree Facility includes
two separate buildings. One is designated for minimum security inmates and the other for
medium security inmates. All minimum security inmates are housed in the medium security
building at present and no inmates are being housed in the minimum security building. Blaine
Street Women’s Facility is for minimum security inmates and has a rated capacity of thirty-two.
For the past two years Blaine Street has not been utilized to its fullest with an average monthly
population of twenty in 2009 and nineteen in 2010 (Table 1).

       Table 1: Jail Population from 2008 - 2011[1]

    Facility        Rated           Average           Average         Average          Average
                   Capacity         Monthly           Monthly         Monthly          Monthly
                                     2008              2009            2010           2011 (Jan-
                                                                                         Feb)

  Main Jail
 Maximum &            311              314              336              350             339
  Medium

   Rountree
   Medium              96              61                51              93               94
   Minimum            162              97                77              n/a              n/a

 Blaine Street
  Minimum              32              23                20               19              15
66 ∫ Santa Cruz County Grand Jury Final Report 2009-2010



A variety of factors determine the security classification of an inmate, whether minimum,
medium, or maximum. This classification is the basis for where an inmate will be housed. To
make the decision, the intake officer will ask a series of questions about previous crimes, gang
affiliation, medical issues/medications, etc. If inmates of any classification require specialized
medication such as insulin or psychotropic drugs, they will automatically be housed in the Main
Jail due to the lack of medical services at Rountree. In addition, if inmates are unwilling to give
up their gang affiliation, they must be housed at the Main Jail even if their classification is
minimum security. Women are housed at the Main Jail if they are classified as a maximum or
medium security risk prisoner, or at Blaine Street if they are deemed a minimum security risk.
Blaine Street has operated below capacity for the last several years.

B. Medical/Dental
Currently, the Main Jail is the only facility that has an infirmary as well as medical personnel on-
site. The Rountree Medium Facility does have an infirmary but, due to budget constraints, it was
closed in 2008 and the medical staff and equipment were moved back to the Main Jail. The
medical staff at the Main Jail consists of a medical director, a special services Lieutenant
(responsible for court security, transportation and medical services), two Assistant Nursing
Directors, eight Registered Nurses (RNs), three Licensed Vocational Nurses (LVNs), and three
medical assistants. The Assistant Nursing Directors are also RNs which brings the total of RNs
to ten at the Main Jail. In addition, the Main Jail has on-call staff to cover vacations of medical
staff but they are not allowed to cover furlough time. The current furlough hours are 156 hours
per person/per year which equates 19½ days per year for an eight-hour workday. The nursing
staff is scheduled for eight-hour shifts, with coverage 24/7. The Assistant Nursing Directors
work ten-hour day shifts, where they overlap one day a week to complete administrative tasks.
The minimum nursing staff is one RN and one LVN for a shift.
An RN is required to assess all new intakes in the sally port/holding area to determine if they are
medically able to be incarcerated or if they need to be transported to Dominican Hospital for
further observation. This assessment consists of a quick interview history, to determine if they
are currently taking any medication or have any psychological problems. The average number of
inmate bookings per month at the Main Jail in 2009 and 2010 were respectively 1068 and 1061[3]
equating to approximately thirty-five intakes per twenty-four hour period. The result is that most
RN staff time is utilized to perform the required initial assessments with little time to assist in
medication distribution or daily contact and care of the incarcerated.

Medication distribution is a large task and part of the RN and LVN staff responsibility. The Main
Jail has two major medication distributions during the day with several other minor distribution
periods, resulting in an average of 800 to 850 medications per major distribution. The LVN staff
is allowed to distribute medications but they are not allowed to handle the initial inmate
assessment process during the intake procedure.

Inmates that require extensive medical observation, primarily individuals undergoing
detoxification, are housed in the “O” unit within the Main Jail, so the RN staff can monitor their
vitals to evaluate the need to transport them to another medical facility.

In addition to medical services, the Main Jail provides dental services to inmates on a limited
basis when warranted. The sentiment that dental services for the inmates needed improvement
                                                      Santa Cruz County Correctional Facilities ∫ 67



came up repeatedly during our investigation. A majority of inmates are often in need of basic
dental treatment upon entry into jail, due to prior limited access to dental services and poor
lifestyle choices of inadequate nutrition and drug use. Furthermore, inmates’ self-esteem is
negatively impacted by their appearance resulting from poor dental hygiene, as was noted by
several of our interviewees. Inmates must currently rely on outside dentists to perform more
complex procedures such as root canals, because of the limited dental services available at the
Main Jail. This entails the use of an officer and van to transport inmates to off-site dental
facilities for their appointments, resulting in an increased security risk.

C. Programs
Title 15 of the California Correction Standards Authority requires the Santa Cruz County
Sheriff’s office to provide a variety of offerings in the areas of education, recreation, and
religion. Many types of programs offered are facility-dependent and gender-specific. Examples
of these programs are the auto body classes offered only at the Rountree Minimum Facility, and
Gemma, a life skills program for women at Blaine Street. GED classes leading to a high school
equivalency diploma are offered at all four facilities, but at the Main Jail the classes are hit and
miss. The Sheriff-Coroner’s Office report from October 2010 stated Santa Cruz County
combined jail facilities provided about 200 hours of programming per month to inmates.[4] The
Main Jail has the largest number of inmates in the County and the inmates are not required to be
enrolled in any educational programs. In contrast, Rountree and Blaine Street inmates are
required to participate in programs and most of the classes are provided on a continuous basis.

To date there are no measurements in place to evaluate the programs offered in the jail facilities.
A 2009 report about the inmate programs in Santa Cruz County stated the following:
“Evaluating program efficacy is elusive, as the measure most commonly used is recidivism: or
the number of people who return to custody.” However, the report also noted that there is no
consistent operational definition of recidivism.[5] In a recent Good Times[6] article Sheriff Wowak
stated, “It’s because we don’t do a good enough job in teaching corrective behavior to keep them
from coming back into the system.”

Several different databases in the County – Health Services, Courts, Jails and Probation – do
track a variety of information on inmates.[5] Unfortunately, these databases are not linked,
preventing staff from cross-referencing the data and using this valuable information to assist in
program development and evaluation. Furthermore, tracking of inmates’ success upon reentry
into society is anecdotal instead of being based upon data.

Santa Barbara County has developed a funded and successful substance abuse program called the
Sheriff’s Treatment Program (STP). The STP began in 1996 in the Male Honor Farm and has
expanded to include participants in both male and female facilities. The STP has measurably
reduced recidivism:
               National and Regional statistics state that 75% to 80% of all inmates
               incarcerated have committed their crime as a direct result of using
               chemical substances (alcohol and/or drugs). These statistics also say that
               75% of those inmates will be re-arrested within the next two years for a
               similar offense... still as a result of alcohol and/or drug usage. We have
68 ∫ Santa Cruz County Grand Jury Final Report 2009-2010



               reduced the recidivism rate for the inmates participating in STP to
               approximately 35 to 40%.[7]

The result of the reduced recidivism has contributed to fewer jail beds being occupied and
reduction in law enforcement hours needed as well as dollars that can be utilized in other
important areas.

In contrast, Santa Cruz County reduced funding by 90% for substance abuse programs from
2003 to 2009 and those funds were reallocated to other programs.[5] Unfortunately, we were
unable to determine the impact that this reduced funding had upon the recidivism, since there is
no mechanism to track this data in Santa Cruz County.

A study by the U.S Federal Bureau of Prisons[8] found a strong correlation between inmates’
successful completion of educational programs and reduction of recidivism. Most of the
programs were designed to supply tools for the inmates’ reintroduction into society. Although
the federal prison inmates in this study had a much longer length of stay than Santa Cruz County
inmates, the data illustrates the strong correlation between educational programs and recidivism.

Another inmate educational program with proven success is a horticultural program in Sonoma
County.[9] This program places emphasis on the practical use of horticultural techniques
necessary to maintain five acres of ornamental flowers and trees, shrubs, and various annual
plants, as well as a summer vegetable garden. The flowers and plants are sold to the public by
appointment twice a year. Programs such as this could be used to provide produce within the jail
system to save money and offer more nutritional options for inmates.

In Santa Cruz County a successful program that has been implemented is the Gemma Day
program. Unfortunately, this program reaches only a limited number of inmates, as it is only
available to women who are housed at the Blaine Street Facility. The participants are involved in
a life skills curriculum which includes parenting, relapse prevention, job preparation and other
classes. The classes are approximately twelve hours per week for nine weeks and released
inmates are allowed to live at the facility for up to eighteen months.

Another area of concern we learned through our interviews was the lack of transitional support
for released inmates. A need exists for additional support in the form of housing and jobs, as well
as therapy for these individuals, such as the Gemma Residential program. We were made aware
by volunteer counselors that many of the inmates have nowhere to go upon leaving the jail
facility. Some transitional housing is available, but there is no process to ensure that all inmates
are aware of how to sign up and take advantage of the housing.

Rather than reverting back to the environment that led to their incarceration, released inmates
can choose to integrate back into society. To help them, the Santa Cruz County Probation
Department, in conjunction with the non-profit organization Friends Outside, has instituted the
Warrant Reduction Project (WRAP). The program provides assertive outreach to individuals who
have failed to check in with their probation officer and are about to have a warrant for their arrest
issued. In addition, the WRAP specialists are also able to assist individuals with peer and support
groups and aftercare case management.
                                                      Santa Cruz County Correctional Facilities ∫ 69



               Since inception of the program in December 2005, WRAP has averted
               over 390 warrants saving an estimated 15,600 jail bed days, with 10,140
               at the main jail. Probation bench warrants issued has dropped by 62%
               since the program began in 2005. This successful innovation has been
               recognized by other jurisdictions who plan to implement similar
               programs.[10]

Findings
F1.   The overcrowded conditions of Santa Cruz County Main Jail will be exacerbated with the
      transfer of state prisoners back to their originating county.

F2.   Rountree and Blaine facilities are not fully utilized with respect to capacity.

F3.   Security, staff and vehicles are required to transport inmates to the Main Jail for
      medical/dental needs due to limited medical services at the Rountree Facility.

F4.   The lack of sophisticated dental equipment at the Main Jail requires secure transportation
      to off-site facilities for those inmates requiring more complex dental work.

F5.   There are no program performance assessment tools, which prevents staff from evaluating
      the effectiveness of the educational programs.

F6.   Due to a lack of consistent communication from jail personnel, not all inmates are aware of
      reentry programs offered at the time of their release.

F7.   There are inadequate programs and resources to assist inmates in their reentry into society,
      such as job skill training, treatment programs, counseling, and transitional housing.

Recommendations
Reduction of recidivism should be one of the primary goals for the correction system. Anything
contributing towards that goal should be encouraged and continued.

R1. Conversion of the Blaine Street Facility into a transitional housing facility or consolidation
    with another facility should be considered.

R2. The Sheriff’s Office should perform a cost-benefit analysis of re-opening the housing
    portion of the minimum security facility at Rountree to reduce overcrowding at the Main
    Jail.

R3. The Sheriff’s Office should perform a cost-benefit analysis of providing medical services
    at Rountree, such as staffing a physician assistant, nurse practitioner or a physician on site,
    versus the current need for secured transportation costs and associated risks.

R4. The Sheriff’s Office should perform a cost-benefit analysis of the acquisition and
    installation of more sophisticated dental equipment for the Main Jail versus the current
    method of securely transporting inmates off-site for dental care.
70 ∫ Santa Cruz County Grand Jury Final Report 2009-2010



R5. The Sheriff’s Office should implement a mechanism to track the effectiveness of
    educational programs within the 2011-12 fiscal year.

R6. Based upon analysis of the tracking data, the Sheriff's Office should modify their existing
    educational programs where warranted or consider implementing successful educational
    programs in use in other jurisdictions, such as Santa Barbara County.

R7. Inmates should be better informed of post-release resources, such as job skill training,
    treatment programs, counseling, and transitional housing.

R8. Santa Cruz County should perform a cost-benefit analysis of the implementation of
    additional programs and resources to assist inmates in their re-entry into society.


Commendations
The Grand Jury would like to commend the entire corrections staff of the county. They were
extremely accommodating, informative, and helpful in providing information, arranging tours
and interviews. Each interaction with staff revealed caring and compassionate individuals who
were able to perform their duties diligently and provide strict parameters for expected behavior
in a safe and orderly environment.

A special commendation should be given to the staff of Blaine Street. The average population
has been reduced from thirty-three in 1998 when it was opened to fifteen in 2011, through the
ongoing efforts of the dedicated staff.

Responses Required
                                                                             Respond Within/
     Respondent               Findings           Recommendations
                                                                               Respond By
  Santa Cruz County                                                              60 Days
                                F1-F7                   R1-R8
        Sheriff                                                             September 1, 2011
  Santa Cruz County                                                              90 Days
                                F1-F7                   R1-R8
 Board of Supervisors                                                         October 1, 2011
                                               Santa Cruz County Correctional Facilities ∫ 71



Sources
  1. Santa Cruz County Sheriff’s Office, Average Monthly Population Reports, Corrections
      Stats 1998-2011, provided by the Sheriff’s office on March 16, 2011.
  2. California Penal Code Section 919 (b), provided by Law and Legal Research website,
      accessed: May 29, 2011, http://law.onecle.com/california/penal/919.html
  3. Santa Cruz County Sheriff’s Office, Average Number of Bookings Reports, Corrections
      Stats 1998-2011, provided by the Sheriff’s office on March 16, 2011
  4. County of Santa Cruz Sheriff-Coroner’s Office, Inmate Welfare Fund Report of
      Expenditures for FY 2009/2010, September 28, 2010, as presented to the Santa Cruz
      County Board of Supervisors on October 26, 2010.
  5. Santa Cruz County Sheriff’s Office, Corrections Division, Inmate Programs, 2009,
      provided by a representative of the Sheriff’s office on January 4, 2011
  6. Hamel, Jessi, “Breaking Out,” in Good Times, June 1, 2011, accessed 6 June 2011.
      http://www.goodtimessantacruz.com/santa-cruz-news/santa-cruz-local-news/2563-
      breaking-out.html
  7. Santa Barbara County Sheriff’s Department, Sheriff’s Treatment Program, accessed: May
      31, 2011, http://www.sbsheriff.org/stp.html
  8. Office of the Inspector General, “The Federal Bureau of Prisons Inmate Release
      Preparation and Transitional Re-Entry Programs,” Report No. 04-16, March 2004,
      accessed: May 31, 2011, http://www.justice.gov/oig/reports/BOP/a0416/index.htm
  9. University of California, “Jail Industries Demonstration Garden,” accessed: May 31,
      2011. http://ucanr.org/sites/scmg/Demo_Garden/
  10. Santa Cruz County Probation Department, Jail Alternatives - Summary and Impact of
      Programs 2005-2010, accessed: May 31, 201. http://sccounty01.co.santa-
      cruz.ca.us/prb/rpts/JailAlt.pdf

Interviews
     Administrators and personnel:
           Main Jail
           Rountree
           Blaine House
     Administrators and personnel:
           County Board of Education
           Santa Cruz Adult Education
           Volunteer Program providers
           Health Services Agency
72 ∫ Santa Cruz County Grand Jury Final Report 2009-2010



Site Visits
       Main Jail - September 8, 2010
       Rountree Facility - October 6, 2010
       Blaine Street - September 8, 2010

Documents
       Adult Title 15 Regulations: Minimum Standards for Local Detention Facilities, Crime
       Prevention and Corrections, Division 1, Chapter 1, Subchapter 4
       Adult Title 24: Minimum Standards for Local Detention Facilities, Part 1, Section 13-102
       and Part 2, Section 1231
       Santa Cruz Grand Jury Report 2007-2008, Santa Cruz County Jail Review
       http://co.santa-cruz.ca.us/grandjury/GJ2008

				
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